Events & Issues

New Delhi, 27 August 2012

Coalgate Scam

MORE THAN MEETS THE EYE

Dr. P. K. Vasudeva

By Col (Dr) PK Vasudeva (Retd)

It is testing time for the ruling Congress-led United Progressive Alliance (UPA) on the Coalgate scam, even as Prime Minister Manmohan Singh broke his silence in Parliament. While he has taken responsibility of all decisions taken by the Coal Ministry, then under him, bigger questions remain. In fact the Coalgate scandal lies not in the whopping financial loss to the exchequer but elsewhere.    

The BJP led-Opposition has been stalling Parliament demanding the resignation of Prime Minister on Coalgate scam for the Rs 1,86,000 crore presumptive financial gain to the private parties estimated by the report of Comptroller and Auditor General (CAG) from the allocation of the coal blocks sans any competitive bidding. Of the three reports of the CAG, it is the one pertaining to the allocation of coal blocks for captive mining by private players during 2004-09 — when the Coal Ministry was for a substantial period directly under Prime Minister Manmohan Singh’s charge — that is the focus of the Opposition’s attack.

The Government is finding it extremely difficult to negotiate a stormy Parliament because on 24 August it rejected CAG’s report on allocation of coal blocks in which it has indicated a Rs.1.86 lakh crore ($37 billion) loss to the exchequer, saying the notion of presumptive loss is flawed. The BJP along with some parties is adamant on the resignation of the PM as it feels that there is no use of discussing this scam in Parliament because the culprits have still not been punished on the earlier scams - 2 G Spectrum, Common Wealth Games and Adarsh scams even after having discussed these threadbare in the Parliament. The Congress as usual is arrogant and in a denial mode.

The real scandal in the allocation of coal blocks for captive mining without any competitive bidding is not the financial gain of Rs 186,000 crore to private parties, as reckoned by the CAG for such mines. This is only a presumptive estimate, based on the total extractable reserves of these blocks; it assumes this entire coal getting mined and sold at the prevailing market rates. The actual ‘scam’ does not lie there.

Coalgate is more about mines allocated to ostensible end-users for their captive requirements, and the allottees, rather than producing, simply squatting on them. This aspect has been brought out even in the CAG’s report, which shows mining happening in only 28 out of the 86 captive coal blocks (private plus public) that were scheduled to take up production during the Five-Year-Plan period ending 2011-12. Unfortunately, they produced not even half of what was targeted from these blocks. The coal ministry did not bother to monitor their production when the power plants in the States were in dire need of the coal resulting in the import of coal at heavier costs.

Viewed from this perspective, Coalgate is a more serious scam compared with the so-called first-come-first-serve allocation of 2G spectrum. The mobile operators, who got the licences without bidding through a transparent auction process, at least launched services. Even if the exchequer was left poorer, the consumers gained from call charges dropping because of the entry of new players.

Coalgate, by contrast, has done little by way of augmenting the country’s coal output or ensuring uninterrupted fuel supplies to power plants. The whole purpose of allowing captive mining and expediting allocation of blocks – even if that meant giving the go-by to auctions – was to boost production in the short to medium run. There was also an additional consideration here, linked to commercial coal mining in India being reserved for the public sector. Since permitting private commercial mining would have required amending the Coal Mines (Nationalisation) Act – a politically sensitive and time-consuming affair – the captive allocation route was projected as a practical alternative. The Act should have been amended even now.

However, from the CAG report, it emerges that the inability to push through the amendment was just a convenient smokescreen for persisting with the ‘policy’ of awarding coal blocks for captive use without any transparency. Even when it came to allocation for captive purposes, the Government should have allocated the coal blocks through competitive bidding, as was proposed by the Coal Ministry in July 2004 and even endorsed two years later by the Law Ministry.

Clearly, those benefitting from its non-implementation despite all this had an equal interest in blocking the legislation ending the public sector’s monopoly in full-fledged commercial coal mining. Since these entities got the blocks cheap, with hardly any penalties for not meeting production milestones, they had more reasons to squat than develop the mines at the nation’s expense.

Thus, the Government needs to answer more than what the PM has stated on Monday last. Seeking Parliament’s “indulgence” he made a statement on the issues regarding coal block allocations. “Any allegations of impropriety are without basis and unsupported by the facts. The observations of the CAG are clearly disputable. I want to assure Hon'ble Members that as the Minister in charge, I take full responsibility for the decisions of the Ministry,” he said.

Earlier, Minister of State in the PMO V.Narayanaswamy and other Ministers had lost no time in accusing the CAG of “exceeding his mandate”. This is not borne out by The Comptroller and Auditor-General’s (Duties, Powers and Conditions of Service) Act, 1971. It makes it the CAG’s duty to audit all expenditure from, all receipts which are payable into, the Consolidated Fund of India and of each State and of each Union territory. Likewise, all transactions of the Union and of the States relating to Contingency Funds and Public Accounts also come under his audit. He and others have no business to criticise the Constitutional Audit body because it does not suit the Government. Leave this job to Public Accounts Committee (PAC).

The temptation to milk the reports for all they are worth will be hard to resist. The Opposition should better let the PAC do its job and not persist with condemnations and demands for resignations just yet. They should also not make the reports an excuse to waste taxpayers’ money by creating bedlam in Parliament for days on end and bringing it to a standstill. It would be wise to get to the bottom of the Coalgate scandal without wasting any more time.--- INFA

(Copyright, India News and Feature Alliance)