7/27/2019 coal scam 2013

1/16

7/27/2019 coal scam 2013

2/16

THE COAL SCAMA STUDY!!

THE SCAMWHAT IT IS!

ESTIMATE

COMPARISON

OF SCALE

THEPROCESS THE PEOPLERESPONSIBLE

THE

GAINERS

7/27/2019 coal scam 2013

3/16

WHAT IS THE BASIC ISSUE?

Coal allocation scam is a political scandalconcerning the Indian government's allocationof the nation's coal deposits to Public Sector

Entities (PSEs) and private companies. In a draft report issued in March 2012, the

Comptroller and Auditor General of India(CAG) office accused the Government of Indiaof allocating coal blocks in an inefficientmanner during the period 2004-2009.

7/27/2019 coal scam 2013

4/16

FIRMS ELIGIBLE FOR A COAL

ALLOCATION

Historically, the economy of India could becharacterized as broadly socialist, with thegovernment directing large sectors of theeconomy through a series ofFive-year Plans.

In keeping with this centralized approach,between 1972 and 1976, India nationalized itscoal mining industry, with the state-ownedcompanies Coal India limited(CIL) andSingareni Collieries Company (SSCL) beingresponsible for coal production.

7/27/2019 coal scam 2013

5/16

This process culminated in the enactment of the CoalMines (Nationalisation) Amendment Act, 1976, whichterminated coal mining leases with private lease holders.

Even as it did so, however, Parliament recognized that thenationalized coal companies were unable to fully meetdemand, and provided for exceptions, allowing certaincompanies to hold coal leases:

1976. Captive mines owned by iron and steelcompanies.

1993. Captive mines owned by power generation

companies.2007: Captive mining for Coal gasification and liquid

faction.

7/27/2019 coal scam 2013

6/16

THE COAL ALLOCATION

PROCESS In July 1992, Ministry of Coal, issued the instructions for constitution of a

Screening Committee for screening proposals received for captive mining byprivate power generation companies.

The Committee was composed of government officials from the Ministry of

Coal, the Ministry of Railways, and the relevant state government.

A number of coal blocks, which were not in the production plan of CIL andSSCL, were identified in consultation with CIL/SSCL and a list of 143 coalblocks were prepared and placed on the website of the MoC for information ofpublic at large.

Companies could apply for an allocation from among these blocks. If they weresuccessful, they would receive the geological report that had been prepared bythe government, and the only payment required from the allocatee was toreimbur se the government f or their expenses in preparing the geological report.

7/27/2019 coal scam 2013

7/16

COAL ALLOCATION GUIDELINES

The guidelines for the Screening Committee suggest that preference be given to the Powerand Steel Sectors (and to large projects within those sectors).

They further suggest that in the case of competing applicants for a captive block, a further10 guidelines may be taken into consideration:

status (stage) level of progress and state of preparedness of the projects;

net worth of the applicant company (or in the case of a new SP/JV, the net worth of their

principals);production capacity as proposed in the application;

maximum recoverable reserve as proposed in the application;

date of commissioning of captive mine as proposed in the application;

date of completion of detailed exploration (in respect of unexplored blocks only) asproposed in the application;

technical experience (in terms of existing capacities in coal/lignite mining and specifiedend-use);

recommendation of the administrative ministry concerned;

recommendation of the state government concerned (i.e., where the captive block islocated);

track record and financial strength of the company.

7/27/2019 coal scam 2013

8/16

1.87 lakh Crore Rupees

Biggest scam in India by now

Report authenticated by

Comptroller and AuditorGeneral of India

7/27/2019 coal scam 2013

9/16

WHATITIS!What is the coal scam?A question many of you would have.

Simply put it is a corruption scandalwhere-in the Comptroller and AuditorGeneral of India (CAG) office has

accused the Government of India forproviding the nation's coal depositsto private and state-run entities in anirregular and arbitrary manner instead

of publicly auctioning them off to thehighest bidder (as is usually done forsuch entities), resulting in a loss ofapproximately 186,000 crore(US$33.67 billion) to the exchequer

during the period 2004-2009.

7/27/2019 coal scam 2013

10/16

7/27/2019 coal scam 2013

11/16

To g e t a n i d e a o f i t ss c a l e l e t s s e e w h a t

this money c o u l d h a v e b o u g h t

:

7/27/2019 coal scam 2013

12/16

The CAG took into account average production cost per tonne of coal of all gradesproduced in open cast mines of CIL as well as sale price as reference value in order

to calculate the financial gain to allottees.

This delay meant that coal was allocated under the existing, opaque process givingprivate companies huge monetary gains.

Coal secretary had warned way back in 2004 about windfall gains to privatecompanies under existing scheme of allotment but PMO continued to delay process

of competitive bidding.

7/27/2019 coal scam 2013

13/16

CAG REPORTS VS.

GOVERNMENT RESPONSE

Pvt. firm gain Rs. 1.86 lakh

crore after blocks given by

nomination.

THE LOSS

Despite repeated advice from

Law ministry, competitive

bidding delayed.

THE

DELAY

After being advised toproceed with auctioning, Coal

Ministry wasted time.

THE

AUCTION

CAGs figure misleading. Of the 57 blocks

cited, only one operational.

Ministry took time to clarify for bidding,

MMDR Act needed changes.

Oppositions from stated like Chhattisgarh,

Rajasthan and Bengal caused delay.

CAGS REPORT GOVT. RESPONSE

7/27/2019 coal scam 2013

14/16

PRIVATE SECTOR Gains (Rs. Cr)

BIGGEST WINDFALL ALLOCATION

PSU Gains (Rs. Cr)

Strategic Energy Tech System Ltd.

Electro Steel Castings and Others

Jindal Steel and Power Ltd.

Bhushan Steel Ltd, Jai Balaji Ltd &

Rashmi Cements

Ram Swarup Lohh Udyog, Adhunik

Corp, Uttam Galva Steel

JSPL & Gagan Sponge

JSPL/MCL/PL/Jindal

Stainless/Shyam DRI

Tata Steel Ltd.

Chattisgarh Captive Coal Co Ltd.

CESC Ltd & JAS Infrastructure

33,060

26,320

21,226

15,967

15,633

12,767

10,419

7,161

7,023

6,851

NTPC

TNEB & MSMCL

JSEB & BSMDC

MMTC

WBPDCL

CMDC

MSEB & GSECL

JSMDCL

MPSMCL

35,024

26,584

18,648

18,628

17,358

16,498

15,335

11,988

9,947

Note: Based on prices at time of allocation

7/27/2019 coal scam 2013

15/16

7/27/2019 coal scam 2013

16/16

WHO IS RESPONSIBLE?The Comptroller and Auditor General of India puts the Coal

Ministry and the government, particularly the PMOs office

during the period 2004-2009 as responsible for the

misallocation of coal blocks. The coal ministry at the time was

headed by the current Prime Minister Dr. Manmohan Singh,

whose clean image has now come under question.