Coalgate :A Failure Of Our Economic System

The judgment of Supreme Court in the Coal Scam or Coalgate to declare 216 coal mines as illegal ,is an eye opener for any democratic system as it not only indicates how private sector in the post reform period has manipulated economic system for its personal growth but also corrupted the government , its ministers and officials to satisfy its over growing desire to expand the industrial empire at the cost of common man. The judgment also provides an opportunity to learn how to manage private sector which is never willing to shoulder nation building responsibility and when it does something then that has huge national cost in the form of illegal exploitation of natural resources. At the same time , the judgment also gives a knee jurk to those people who didn't have care for national interests.It is shocking to note that politicians and private firms devised a new term Captive blocks to loot of natural resources. 

For the first time,Coal scam came into the limelight when advocate M.L.Sharma and members of an NGO"Common Cause" filed a PIL in the Supreme Court alleging a large scale violation of rules and procedures in the process of allotting coal mines to them who don't fulfill criteria or who are not eligible to get coal blocks . After that CAG reports on the Coal Ministery pointed out that there is a large scale of loot of public money amounting to Rs.1860000lacs crores.It  increased the political temperature of the country and opposition party especially BJP led scathing attacks on theUPA government.Hearing a PIL, the Supreme Court ordered a CBI enquiry into the Coalgate scam and even directed CBI to report to it directly when UPA government tried to influence the CBI to save certain people. The role of CBI in the Coalgate investigation was also under doubt as the Supreme Court called it a parrot.On the several occassions CBI under the political influence tried to save certain people and even challenged CVC recommendation to file cases against 14 major beneficiaries like Jindal Power, Adani , Jaiswal group, Aditya Birla group etc.
CAG commented on the changes in the procedure on the allotment of coalmines as -

"It was only in August 2006 that the Department of Legal Affairs opined that competitive bidding could be introduced through administrative instructions. However, the same Department also opined that legislative amendments would be required for placing the proposed process on a sound legal footing. In a meeting held in September, 2006, Secretary, Department of Legal Affairs categorically opined that having regard to the nature and scope of the relevant legislation, it would be most appropriate to achieve the objective through amendment to the Mines and Minerals (Development &;Regulation) Act."

It all happened in 1993 when the government decided to amend section 3 (3) of Coal Mines Nationalization Act to enable the coal mining for the private sector companies for captive use for Power, Steel and Cement plants as end users.It will be done through  with competitive bidding and transferred the onus of allotting coal mines through the screening committee on the basis of first come , first serve.All other government followed the same policy but twisted it scope to suit their favorites. In the meantime the government on the recomendation of the Investment Commission headed by Ratan Tata dereserved 43coal mines of CIL and these mines were opened for bidding for the private firms through Screening Committee. Lster on it was observed by the Supreme Court "The Screening Committee has never been consistent, it has not been transparent, there is no proper application of mind, it has acted on no material in many cases relevant factors have seldom been its guiding factors."

We all know that Narasimha Rao government was managing the majority on the outside support and MP's of JMM whose leader Shibu Soren was the coal minister and most of the illegalities were committed  or initiated at that times. Coal Ministery all of a sudden became a creamy and very luracative ministery and all the heay weight politicians tried to grab it.Other were just following what was done earlier to suit their desire. During the NDA regime there was no change in the policy matter or they never wanted to change the previous government policy on the allocation of the coal blocks to private firms.The worst was even to come when the very clause of end users was ignored and now it became clear that any one having Influence in the government can get a coal blocks.All of a sudden with the arrival of UPA at the center provided great  impetus for privatisation and liberalisation of coal mining sector.All the successive coal ministers tried to manipulate procedural guidlines to help their near and dear or who was ready to fulfill their demand.It led to a massive loot of natural resouces on the one hand and increased import of coal on the other.It is nothing but double damage to the economy.

In March 2012 the CAG Draft Report accused government of inefficient allocation of coal blocks during 2004-09 leading to a windfall gains of Rs. 10.7lakhs crores.It created furores in the country and  Prakash Javadekar and Hansraj Ahir filed a case with CVC demanding a full fledged enquiry into the scam . Finally the case shifted to the Supreme Court which delivered its judgment ststing that 216coal mines are illegal and the license of these mines should be canceled. 


What seems to be of great interest is that how did governments after government allowed loot of natural resources by the private players by twisting the plocy guidelines.Again there is a big question Does Liberalization create an environment in which  all these corrupt practices are allowed or these scams are natural outcome of our system? Or these scams are the outcome of a nexus between private firms, politicians and beurocrats who diveded their respective shares under the guise of Economic reforms.No less is responsible the PM Manmohan Singh under whose nose everything had happened and who blissfully remained a mere spectator and a true follower of 10Janpath. 

And his replies in the Parliament are more astonishing.He said" Let me humbly submit that even if we accept CAG's contention that benifits accrued to private companies , their computations can be questioned on no. of technical points The CAG has computed financial gains to pvt.parties as being the difference between the average sale price and the cost of production of CIL of the estimated extractable reserves of the allocated coal blocks.
Firstly computation of extractabe reserves based on acerages would not be correct.Secondly, the cost of production of coal varies significantly from mines to mines even for CIL due to varying geo-mining conditions, methods of extraction, surface features, no.of settlements, availability of infrastructure etc.Thirdly, CIL has been generally mining in the areas with better infrastructure and more favorable mining conditions where as the coal blocks for captive mining are with more difficult geographical conditions.
Fourthly, a point of the gains would be in any case get appropriated by the govt.through taxation and ubder MNDR Bill, presentlybeing considered by the Parliament,26% of the profits earned on coal mining operations would have to be made available for local area development.
Therefore aggregating the purported financial gains to the pvt.parties merely on the basis of the average production cost and sake price of CIL could be highly misleading.Moreover as the coal blocks were allocated to pvt  companies for captive purposes for specified end users it wouldnot be appropriate to link the allocated blocks to the price of coal set by CIL.

The whole story of coal scam gets even more clear when a PM who was also in charge of the Coal Ministery was defending pvt.parties on flimsy grounds and was criticising CAG for its accounting procedures.And one of the biggest beneficisry was none other than a cabinet minister Naveen Jindal company and many others were from different political parties.Not only the politicians and government officials but the role of middlemen and lobbyists became very dominant in getting coalmines to the both deserving and non deserving industrialists by influencing and manipulating the rules.The role  of lobbyists like Nira Radia and others needs to be examined thruoghly .