THE COALGATE SCAM (FSRH IV)
Updated: Mar 29, 2021
The coal allocation scam, popularly known as ‘Coalgate’ in media. It is a political scandal that was surrounded by the UPA govt. in 2012.
As we all know India is a country rich in minerals, spices, and has huge deposits of coal. There are many blocks of coal in India which is under government control.
The government allocates these coal blocks to public and private individuals or enterprises for use. The proper procedure of allocating these blocks is that there must be an auction held for these coal blocks and the interested enterprises can participate in those auctions. The highest bidder is given the coal block for his or his enterprise’s use. This is/was the legal and correct way to allocate the coal blocks.
But in this scam, the government allocated 194 coal blocks wrongly to private enterprises for their captive use, but the right procedure was that the interested private enterprises must bid in the auction.
It came to light when the Comptroller and Auditor General of India (CAG) accused the government that without the auctions conducted the 194 coal blocks were allocated to private individuals/enterprise for captive use.
This scam is considered the biggest scam in India and has the involvement of many high-profile people in this scam.
CAG Report and the Investigation
The premise of the CAG’s argument was that the exchequer suffered a huge loss and public and private entities enjoyed windfall gains because the government’s policy of allocating coal blocks was non-transparent. It alleged that despite having the opportunity to bring in transparency, the government did not introduce the process of competitive bidding. It also found that many politicians lobbied for allotment to certain private players raising questions about crony capitalism. The CAG also said some private players got more coal blocks than needed for their captive operations and several companies sold coal meant for internal use in the open market. Many firms were also found to be squatting on blocks for years on end.
The CAG initially estimated a Rs. 10.6 lakh crore loss, but the final report tabled in the parliament put the figure at Rs. 1.86 lakh crore.
The initial report of CAG only said that the blocks of coal could have been allocated with more efficiency and the government could have earned more profit. At no point, he says that there was any corruption in the allocation. The question of corruption arose by the complaint of BJP by which the Central Bureau of Investigation (CBI) was told to investigate the matte
The CBI has named 12 Indian firms in a First Information Report (FIR), the first step in a criminal investigation. These FIRs blame them of exaggerating their net worth, failing to tell past coal allocations, and hoarding rather than developing coal allocations. The CBI officials investigating the case have guessed that bribery may be involved.
The matter received widespread media coverage and reaction from the public. And in a session of parliament, the BJP questioned the government’s way of handling the allocation and asked for the Prime Minister’s resignation.
The government said that the delay in introducing the auction process was a result of coalition politics. It also alleged that opposition ruled states opposed the auction methodology. The government defended its allocation policy saying maximization of revenue shouldn’t necessarily be the government’s prime motive, as an auction can lead to higher prices hurting consumers. Prime Minister Manmohan Singh has rebutted the CAG’s report and claims there was no misdoing.
A complaint filed by the BJP resulted in the CBI starting an inquiry into described corruption in the allocation of coal blocks. The CBI has so far lodged 14 cases against individuals and firms including high profile industrialists like Naveen Jindal and his company JSPL, Kumaramangalam Birla, Congress MP Vijay Darda and his brother Rajendra Darda, JLD Yavatmal Energy Limited, AMR Iron & Steel Private Limited, Vini Iron & Steel Udyog among others. The CAG report also resulted in the formation of an Inter-Ministerial Group (IMG) to decide on the de-allocation of coal blocks that were not developed on time. The IMG recommended de-allocation of 13 blocks and forfeiture of bank guarantees of 14 allottees including the likes of Tata Sponge, GVK, Arcelor Mittal, Monnet Ispat & Energy, Adhunik Metaliks, etc.
A Standing Committee report has suggested that allocation of all coal blocks between 1993 and 2008 was unlawful, searching licenses of those mines where production hadn’t started to be cancelled, in effect prosecuting both the NDA and UPA administration.
What was Prime Minister Manmohan Singh’s role in all this?
Former Coal Secretary P C Parakh who has been charged by the CBI along with Birla hit out at the PM in 2012 for overruling his call for auctions and continuing arbitrary allotments of coal blocks. 142 blocks were allotted during the PM’s tenure as Coal Minister. These allegations emboldened the BJP which then repeatedly demanded the PM’s resignation.
As many as 157 files, crucial evidence for the CBI probing the scam, have gone missing including those containing minutes of screening committee meetings, allocation records, etc. While the coal ministry says it has deposited the bulk of the files with the CBI, reports suggest 18-20 crucial files remain untraceable. The CBI has instituted preliminary inquiries into the mysterious disappearance. Without these files, the probe could be stuck in limbo.
This scam also is known as ‘Mother of all Scams’ made the Indian Government suffer a huge loss. It becomes the prime responsibility of the Government to keep in check all such records and not act only when the damage has been done.