New Delhi: On March 4, The Reporters’ Collective published an investigative report titled “Modi gov't illegally barred West Bengal from coal auction, benefiting a corporate”. In short, our report presented evidence that the Union government illegally blocked a West Bengal government’s corporation from bidding for the Sarisatolli coal block. (Read the story here)
We revealed the internal documents of The Comptroller and Auditor General (CAG) corroborating our investigation. We also revealed that CAG had found proof of a corporate group subsequently colluding to bid for the same block, which it ultimately won. When confronted by CAG, the Union government admitted that the West Bengal government’s PSU had been eligible to bid for coal blocks. However, they defended the decision saying the auction, even in the absence of the state PSU, was competitive.
During reporting, we repeatedly requested the coal ministry to respond to the questionnaire we sent, but they didn’t. However, on the day the story came out, the government's PR office, PIB, published a statement in response (read it here). Soon, Union minister for Coal Prahlad Joshi posted the statement on X with a comment that the “allegations against the Union government barring West Bengal are baseless.”
The Collective carefully reviewed the statement, and reaffirms every word in its investigative report. We stand firmly behind our reporting. We found the coal ministry’s response to the investigation fails facts, omits evidence and ignores the evidence in the story.
For example, it fails to mention or respond to the revelations of the CAG report and its internal documents revealing collusion. We have released the entire draft CAG report along with other documents for transparency (Access it here).
We found that the government’s statement is self-contradictory in parts, and also contradicts the coal ministry’s correspondence with the CAG.
Here is the review of the coal’s ministry’s response to our story:
Ministry’s claim: It is alleged that the Coal Ministry disqualified West Bengal Power Development Corporation Limited (WBPDCL) from participating in auction of West Bengal-based coal mine because WBPDCL was a prior allottee and has not paid additional levy within the prescribed time. Allegations made in the article are incorrect and baseless.
The Collective’s response: Our reportage is grounded in the findings of the CAG tabled in Parliament in 2016, the ministry’s records, and correspondence between the Ministry of Coal and CAG on the findings revealed by us. The government’s public statement is self-contradictory and goes against the claims it made before the CAG.
In 2015: Coal Ministry disqualifies the West Bengal company from bidding, labelling it as a prior allottee of a coal mine that hasn't paid a levy set by the SC . Yet, the Ministry allocated it coal blocks while denying it the auctioned one.
The law says the fine should be paid by the identified party before being eligible for either routes, auction or allocation.
Later in 2015: The CAG questions the ban on the West Bengal company in internal correspondence with the government. The coal ministry admits the company was not liable to pay the fine because it had given the block to another joint venture firm to mine. It justifies its decision to not let the company bid in auction for one particular block while allocating it to others.
In 2016: The West Bengal company’s disqualification comes under CAG’s heavy criticism. CAG in its public report says: “This disqualification was not as per the existing provisions.” In simple English, the move was illegal.
In para 2 of the latest statement: Government flips again, says the West Bengal company is not a prior allottee but it is a promoter of the joint venture that was actually mining a coal block prior to 2014, which was the prior allottee. This joint venture had not paid the fine. So the promoter WB company was not allowed to bid in auctions.
This contradicts the Ministry’s earlier decision to allow a promoter of a prior allottee to bid for a coal block despite the joint venture not paying the fine. More on this below.
Ministry’s claim: The West Bengal government’s company, WBPDCL, was a promoter of the joint-venture that was actually mining the coal block. Such promoters are not allowed to bid under the law so it was debarred.
The Collective’s response: It is true, the West Bengal company WBPDCL was a promoter of the joint venture. So was another West Bengal government firm, Durgapur Projects Limited. While WBPDCL was barred from bidding one block (the auction for which was later rigged in favour of one company), second promoter Durgapur Projects Limited was allowed to bid for other coal blocks. This contradicts the government’s new claim that promoters of this joint venture were barred because the joint venture had not paid the fine levied by the court.
Ministry’s claim: Allegations of collusion and less competition for private company are baseless.
The Collective’s response: The CAG report red-flagged the auctions of 11 blocks in which it “could not draw an assurance that the potential level of competition was achieved”, a bureaucratic euphemism for failed auctions. In these cases, it said that some bidders participated along with their sister firms, indicating collusion.
It also presented a startling anonymised “case study” where two bidders bid from the same private Internet Protocol (IP) address. According to CAG protocols, communication among bidders is considered a textbook case of “collusion”. This would undermine competition in an auction. However, in this case study the names of neither the companies nor the coal block were mentioned.
We accessed internal correspondence of the CAG in which the coal block and the companies were named. We cross-checked with publicly available auction data and then accessed corporate records of all companies named. The documents showed that the RP Sanjiv Goenka Group flagship firm had acquired the firms days before the scheduled auction. It then competed against its own firms – one of whom did not bid at all. The other bid once from the same IP address as its parent company. Read our detailed findings here.
Our new investigation, (read it here) based on CAG’s findings, went a step further and exposed how the competition for the coal block was further undermined by wrongly disqualifying another bidder, WBPDCL.
Ministry’s claim: As per bidding document, a joint Venture (JV) company formed by two or more companies having a common Specific End Use (SEU) were independently eligible to bid in the e-auction. This provision was kept to promote bidders to bid aggressively from the initial stage and to restrict bidders from the same company to form a cartel, thus reducing competition.
The Collective’s response: This marks yet another flip-flop by the Ministry of Coal. The provisions it initially cited were effective for the first two tranches of coal auctions, but they were amended in June 2015. Why the change?
Internally, the government conceded, “It has been felt that this provision is prone to be misused.” “The same company may not bid at all or aggressively for its bids placed with different End Use Plants for the same coal mine,” it said. Despite admitting that the provisions were bad for competition, the ministry has now chosen to defend these provisions in its press release.
Ministry’s claim: In case of Sarisatolli coal mine, 5 bidders were technically qualified for participation in e-auction (FPO) and a total 167 quotes bids were received during the auction which is a clear indication of strong competition.
The Collective’s response: The Ministry of Coal claims the number of bidders and bids is a “clear indication of strong competition”. However, the breakdown of bidding behaviour shows that it was essentially a contest between two players. There were five technically qualified bidders for the block. One of them did not bid at all. Of the four left, three belonged to the same conglomerate. Of these three bidders, only two actually bid. Of these two, one bid only once and that too from the same IP address as that of the parent company.
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