But before I launch into this longish thread, I first have a request.
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Back to the thread:
On 8 Feb the gov't tabled a White Paper on the economy that supposedly showed how the Modi gov't has fared better than the UPA regime. It dedicated an entire section to alleged scams of the UPA gov't. The 'coal scam' finds first mention in this section.
The alleged scam involved a gov't screening committee that allocated coal mines to pvt and gov't companies between 1993 and 2011. Since there were no competitive bids, the CAG observed that the gov't did not get the fair value for allocating these blocks.
The BJP went to town with the report and rode an anti-corruption wave to power. In September 2014, the Supreme Court held allocations for 204 coal blocks made under this route "illegal" and quashed them.
The very next month, Modi gov't unveiled its new plan to allocate mines.
The plan involved 2 routes: auctioning & directly allocating mines.
Lets first look at auctions.
While auctions should've been a simple exercise, the gov't segregated the mines based on end-use of coal. Some mines were earmarked for power sector, others for steel, yet others for captive power plants & so on.
Only those companies with these specified end-uses could bid for the blocks. So, for example, a bidder needed to have a power plant to bid for a mine earmarked for this.
The gov't claimed the auctions would bring in transparency, revenue generation and competition in the sector.
Did that happen? No. The country instead saw rigged auctions, cartelization, arbitrariness and regulatory chaos.
But the gov't was warned this would happen. By its own men.
Two MPs, RK Singh and Rajeev Chandrasekhar, now union ministers, wrote scathing letters against the plan.
Singh cautioned that by allowing only select companies to bid, the gov't was resorting to "limited tenders". He said this would lead to cartelization, loss to the gov't, undermine competition and super profits for the private firms.
His December 2014 letter was ignored.
Two months later, Chandrasekhar issued his stern warning. He labelled the Coal Bill "hastily drafted" and informed the Coal Minister of the perception that the gov't has "compromised" on "fair auctions". He questioned the gov't's commitment to BJP's manifesto. He too was ignored.
The gov't enacted the Coal Mines Special Provisions Act in Feb 2015. The country's first-ever coal auctions were held with much pomp shortly after.
But just as its future union ministers had warned, the auctions fared poorly. Read the story here in English.
In July 2016, the CAG tabled its report on the coal auctions. In its report, the CAG noted that in 11 cases there was potential collusion among bidders which would've led to undermining the competition for the mines.
In simpler terms, the gov't was shortchanged. Yet again.
In a particularly alarming case, the CAG said 3 out of 5 bidders for a mine belonged to the same parent company. Two of them had bid from the same IP address! The CAG presented the auction as an anonymous "case study".
We @reporters_co reported the missing details. We found that a RP Sanjiv Goenka Group firm acquired shell firms and competed against them in the country's very first coal auctions. It was declared winner and bagged the block. Read this story here.
For the first 2 years, the gov't portrayed a rosy picture of the auctions and revenue generated. But by 2017, the cracks became obvious. In parliament the Coal Minister admitted that following complaints of cartelization and lack of "fair value", bids for 4 mines were cancelled.
Shortly thereafter, the gov't set up a 'high powered expert committee' to look into issues of the auctions and set the sector straight.
The committee report now recommended a u-turn.
After attacking the UPA govt over loss of revenue and peddling exaggerated figures of money earned from its auctions, the Modi gov't was now set to ditch "revenue maximisation" as an approach altogether!
Half a decade later, the gov't once again revamped the sector.
In June 2020, Modi announced that coal sector needs to be freed from decades of "lockdown" (it was the Covid era). Commercial coal mining was ushered in. Bidder eligibility criteria was done away with. Mines would no longer be segregated based on end-use.
In the first commercial auction round, one of the blocks was among those whose bids were cancelled for not reflecting "fair value" in 2015. We @reporters_co found it had gone for an even cheaper price in 2020 than it would've fetched in 2015! The gov't this time accepted it.
Our calculations showed that the state of Chhattisgarh, which housed the mines, would as a result end up losing Rs 900 crore a year and Rs 24,000 crore over the life of the mines.
The auction saga doesn't end there. We found that the gov't had overturned objections of its own environment ministry and its scientists to open up a coal mine in dense forests for auctions. All at the behest of corporate lobbying. Adani, part of the lobby, became sole bidder.
And what happens when a block has a sole bidder for two rounds?
A gov't committee has discretionary powers to allot it to the sole bidder. Taking us back to square one! The reports titled "Advantage Adani" are here.
That's all on the auction side. Lets look at the second route: direct allotment. Under its coal law, the Modi gov't sneakily snuck in a provision that allowed it to allocate coal mines without auction to gov't-owned firms.
While the general perception is that most mines are auctioned, it's not the case. Majority of mines have been allocated under this route, shows an analysis by researcher @gpriyanshu based on Coal Ministry data.
These gov't-owned firms can then sign up pvt firms to actually mine the coal blocks for them. This arrangement, known as MDO, was pioneered by the Adani Group. Adani Group also has bagged the most MDO contracts in the country. Credits: @gpriyanshu again with his stellar research.
The contracts have come under sharp criticism for their opacity since the rate at which the MDO contractor sells coal to the gov't-owned firm is confidential even under the RTI law.
Some of these contract were signed before the SC coal scam judgment and continue till date.
We @reporters_co found that the PMO in 2020 had called such contracts "inappropriate" and asked for a reform of the sector. Officials huddled over the issue twice and found that an Adani-led contract fit the description of what PMO called "inappropriate".
But instead of taking action, the gov't decided to leave the contract as is and resolved to not allow other firms to sign on similar contracts in the future. In effect, granted Adani Group an extraordinary favour. Read here.
While the thread is over, our work isn't. We'll soon be back with more revelations about the coal sector. Watch this space.You can read our latest story and the coal scam docs (at the bottom of the page) here.
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