Coalgate, like 2G, happened under PM’s watch

The Union Government has, after much delay, tabled the final report of the Comptroller and Audito-General of India on irregularities in coal-block allocations during the UPA tenure. This has, rather predictably, led to allegations and counter-allegations including the mandatory demand for the Coal Minister in-charge of these allocations to resign. The Coal Minister, for most part, happened to be Manmohan Singh who alternated with Shibu Soren (depending on the latter’s jail visits and duties as Jharkhand Chief Minister).

As events unfold, one can observe the sheer helplessness on the part of Manmohan Singh who, though personally honest, let these irregularities happen. And this is not the first time. Gandhi’s words have consistently found resonance when one objectively looks at Manmohan Singh’s leadership. Writing in Hind Swaraj, Gandhi had said “The Prime Minister is more concerned about his power than about the welfare of Parliament. His energy is concentrated upon securing the success of his party. If they (Prime Ministers) are to be considered honest because they do not take what are generally known as bribes, let them be so considered, but they are open to subtler influences. In order to gain their ends, they certainly bribe people with honours. I do not hesitate to say that they have neither real honesty nor a living conscience.”

Here is an analysis of some aspects of the irregularity and important takeaways of Coalgate.

What was the policy?

Simply put, a Screening Committee consisting of the Union Coal Secretary, representatives from various Ministries, state-owned corporations and State Governments would brainstorm on who can be allotted captive coal-blocks. NDTV’s Sreenivasan Jain, who scanned minutes of these meetings, observed ( http://www.ndtv.com/video/player/truth-vs-hype/truth-vs-hype-of-coal-gate-part-i/235426) that there were no detailed criteria for selecting allottees except the sheer force of presentations. Another interesting observation is that a lot of deference was given to the allottees recommended by representatives of State Governments.

While it is true that the same system prevailed during NDA’s tenure, this system originated during the Narasimha Rao Government when it was observed that Coal India Limited could not alone bear the burden of meeting domestic coal demand.

Demand for auction

The then Coal Secretary PC Parakh reportedly kept persisting with Manmohan Singh that the Screening Committee system be changed to a system of competitive bidding. The Prime Minister and the PMO alternated between giving the competitive bidding system serious thought and postponing it on the grounds that this required an amendment in law. Interestingly, as Tehelka reports, (http://www.tehelka.com/story_main53.asp?filename=Ne110812Coverstory2.asp) the Law Secretary opined that the decision to change allocation procedure could have been taken through a mere executive order (instead of going to Parliament for a legislative amendment). Yet, the PMO persisted on effectuating this change through a legislative amendment.

Persistence with Screening Committee system and BJP’s role

Despite repeated attempts by PC Parakh and intermittent intent shown by Manmohan Singh, the Screening Committee system continued. The consistent opponent to the system of auction was Minister of State Dasari Narayana Rao (a Telugu filmstar who is apparently a close confidant of Sonia Gandhi). That the Prime Minister was helpless in effectuating a change is obvious.

Notably, two BJP-ruled State Governments sent written objections to the system of auction/competitive bidding. As Tehelka documents ( http://www.tehelka.com/story_main53.asp?filename=Ne110812Coverstory2.asp), Vasundhara Raje’s Government (Rajasthan) wrote to the Prime Minister arguing that a change to a system of auction would take away the State’s prerogative in selection of lessee (since, under a system of auction, lessee would effectively be decided by the Centre). Raman Singh’s Government (Chhattisgarh) wrote that in the interest of growth of iron and steel industry consequent to the boom in the international iron and steel market, to maintain viability of iron/steel units in India and to treat new allottees on an equal footing with previous allottees that got coal-blocks at cheap rates, the Screening Committee system should continue.

Notable irregularities in implementation

While the Screening Committee system theoretically has its rationale in view of the larger goal of cheap availability of captive coal for meeting domestic demands, particularly in the iron and steel industry, the arbitrary and shocking allocation of coal-blocks, ie, the implementation of the policy, raises a big question mark.

Indeed, auction/competitive bidding is the best way to ensure transparency and fairness in the procedure. However, auction/competitive bidding may not always be the most desirable method depending on the extent of involvement by the Government in the development and growth of the sector. If a Government’s objective is to support industrial growth by ensuring availability of captive coal to key sectors like power, steel and cement, auction may push up the costs of such commodities.

The merits and demerits of the policy can be endlessly debated. The UPA continued with the Screening Committee system and can justifiably point to responses from Rajasthan and Chhattisgarh Governments. They have also pointed to the continuation of the policy by the NDA Government.

However, till date, the UPA has not been able to pinpoint one irregularity in implementation of this system by the NDA Government. Instead, the UPA has long used the ‘policy-for-larger-goal’ argument as a subterfuge for pushing aside blatant wrongs in implementation of the policy, a trick eerily similar to its response to the 2G Spectrum scam.

Note the following irregularities reported by NDTV and Tehelka so far:

1) Tourism Minister Subodh Kant Sahai wrote to the Prime Minister seeking his “personal intervention” in getting blocks allotted to a company allegedly run by his brother. A writ petition has been filed in Delhi High Court against this allocation. When asked, Sahai reportedly said ( http://www.sunday-guardian.com/news/subodh-sahai-urged-pm-to-allot-coal-blocks-to-brothers-firm), “Writing a letter is not a big deal. It hardly matters”.

2) As NDTV reported, one allottee is an Ayurveda company (Baidyanath Ayurved Bhavan Pvt Ltd). On what basis an Ayurveda company was considered eligible to run a captive coal-block boggles one’s imagination. The UPA has not been able to pinpoint one instance of an ineligible entity getting a block during the NDA tenure.

3) If a method other than auction is followed for allocation of coal blocks, it is expected that the Government has a high interest in ensuring that the allottees adhere to the conditions of the allotment and meet the goals of the Government. As it turns out, 80 per cent of the allottees have not yet started producing coal from their respective blocks. NDTV reported that a few plants are operating as Independent Power Producers selling power at lucrative rates in short-term market (this is called ‘merchant power’.)

The UPA has now set up a committee to identify deliberate defaulters. Since March 2011, when the media paid attention to this potential scam, the Coal Ministry has suo motu cancelled 14 allocations. To what extent promoters of these entities have been financially enriched is anybody’s guess.

That said, the BJP spokespersons may do well to focus on the arbitrary and irregular implementation of the Screening Committee system instead of critiquing the choice of the system. Like the 2G Spectrum scam, that is where the real dirt lies. And, that is where the NDA was far more sincere and honest.

(Photo by Daniel Berehulak, courtesy: http://www.danielberehulak.com)

Related LinksHome