Showing posts with label captive mining. Show all posts
Showing posts with label captive mining. Show all posts

Monday, August 27, 2012


Ever since the ‘Water Gate’ scandal in the U.S., suffixing a ‘Gate’ with the names of big scandals has become a general practice especially among the Newspapers here, in India. Now when another big scandal rolled out from the Office of the Comptroller and Auditor General of India related to coal field allocation it has instantly been nick named cutely as ‘Coal Gate'. The entire Media refers it as such, paving way for the real “Colgate” to get some free mouth-marketing throughout India. Whoever coined the phrase deserves a hefty Prize for it from the American Company.

The so-called ‘Coal Gate’ scam came to light when a draft report of the comptroller and auditor General of India was leaked and got to a Newspaper. The allegation in the draft report is that 155 coal Blocks were allotted without public auction to private companies for captive mining, causing a loss to the Government to the tune of 1,86000 Crore rupees or about $34 Billion. The C A G himself had stated that the paper was only a preliminary draft and it had to undergo discussions with the Government  before it is a valid audit report. However the opposition took up the matter and it is now a big political issue demanding resignation of the P.M.

Actually the allocation of Coal blocks for captive mining was done properly in tune with the precedent. The precedence in the matter is to allot Blocks for eligible parties by a screening committee. This time also the Blocks were allotted that way. The C A G thinks that competitive bidding would have fetched more income to the Government.

The coal fields of India stand nationalised, consequently, to allow private parties’ participation the way C A G wants needs legislation. The present allocation thru screening committee is done upon the strength of some amended laws.  Besides, the competitive bidding need not always yield higher income especially if the bidders gang up and bid down the amount.

The figure shown as loss to the exchequer is an astronomical one. The coal field auction is not like Spectrum sale. In spectrum business both sellers and buyers know the product and outcome. As regards coal fields, The coal lay inside the Mother Earth and bidding is done on some estimate of coal reserve which can go awry.  Some Blocks may contain less than what is expected or some may have more. The C A G’s estimate of potential stock of Coal is only notional.

One other factor is that the sale is for only a stipulated period ( in this case 25 years)     Though the sale took place five years back mining has not started yet in any of the fields except for one due to administrative delays like environmental clearance etc. The C A G’s calculation of income, thus, is not in tune with the ground realities.

However, those arguments are not fully valid against a demand for a transparent competitive bidding process. The Government could have some way auctioned the Blocks in a fully transparent manner especially considering the experience with 2G spectrum allocation and its aftermath and if it had done so, the present imbroglio could have been avoided.

 Now both the Government and the opposition are busy charging and counter charging on the issue  and the Parliament remains paralysed for the past several days.

The C A G is doing a great service to the nation by giving emphasis on the welfare and prosperity of the country as a guiding principle and pursuing it without fear  or favour.

Images from Google