A decade ago, businessman-cum-politician Naveen Jindal leapt into the public imagination when the Supreme Court endorsed the right of the common man to hoist the national flag any day of the year. It has been the calling card of the Congress MP from Kurukshetra ever since, one he has used to good effect. He has earned other sobriquets along the way—young business tycoon, lover of polo and property, man of tradition (even if it means defending khap panchayats in his home state, Haryana), and a card-carrying member of the ‘young turks’ club.
This is set to change—dramatically. As a prominent Congress politician, Jindal is now being seen at the heart of Coalgate, wherein private companies leveraged political and bureaucratic connections to corner lucrative coal blocks for captive use. And with as many as 70 such captive coal blocks not having come into production, it’s apparent that hardly any benefit has accrued to the country and the common man either through cheap power or controlled prices of steel or cement. Observers across the spectrum are now calling it a test case of ‘crony capitalism’ in India.
Naveen Jindal’s $3.5-billion Jindal Steel and Power Ltd (JSPL), wholly or with other companies, has access to coal from nine captive blocks spread across four states—Chhattisgarh, Jharkhand, Madhya Pradesh and Orissa—with estimated reserves of a mammoth 2.81 billion tonnes. Four of these blocks are now under scrutiny for non-operation. JSPL made $723 million in profits in 2011-12.
As CPI(M) leader Tapan K. Sen points out, despite the private sector having been allocated a large number of captive blocks, it is still the state-run Coal India Ltd (CIL), with an estimated reserve of 76 billion tonnes, which is meeting over 95 per cent of the thermal power generation requirement in the country. Planning Commission member B.K. Chaturvedi concurs that captive blocks “have done very badly. Our expectation was that captive blocks would generate 104 million tonnes of coal during the 11th plan. But they could generate only 36-37 million tonnes, making it difficult to bridge gaps in production.”
“There is nothing wrong with lobbying,” says former petroleum secretary T.N.R. Rao, “unless there is under-the-table payment. Of course, there is considerable nepotism and crony capitalism as everybody who gets a block has political backing. As you have never had any transparent norms, there is no way to judge the pre-qualifying criteria.”
The problem lies in the fact that the power generated with coal from captive mines, which costs around Rs 400 per tonne, is being sold at a spot rate of Rs 4.50-5.0 per unit, far from the affordable power the country seeks. And it’s not JSPL alone which is at fault here; the government is equally to blame. That could explain the power ministry’s internal observation on July 16, 2012, (which has been viewed by Outlook) that despite having requested the coal ministry to “advise all coal block allocates to participate in the bids for sale of power from end-use projects as per guidelines of the ministry of power or face cancellation of coal block allocation”, the coal ministry chose to remain “silent on incorporating the condition”. It was only after the brouhaha erupted that the ministry very reluctantly agreed to enforce the norms that would require coal block owners to sell cheap power. Now tariff-based bidding by the power companies has been incorporated in coal block allocation.
It doesn’t help Jindal’s case, though, that many other of his firms’ violations have come to the fore in recent years. Last year, the Union ministry of environment and forests (MOEF) withdrew the permission granted to Jindal Power for the construction of a 2,400-MW power project in Chhattisgarh for proceeding without getting environment clearances. “It is full of violations of all kinds, including implicating people in false cases,” says R. Sreedhar of Mines, Minerals and People, an NGO working in the mining areas.
However, Jindal isn’t the only private power player to indulge in such tactics. As one senior bureaucrat in the coal ministry admits, there isn’t possibly one case where some political pressure—and in many cases bureaucratic favour—has not swung the decision on coal allocation. This is borne out by the fact that the majority of the allottees—including Anil Ambani’s Reliance Energy—succeeded in getting the rules bent, as the office of the Comptroller and Auditor General (CAG) of India has pointed out in its report.
In the case of the Sasan coal mines in Madhya Pradesh—where production began in a very timely manner recently, thus escaping the ongoing probe—the mine plan was changed from 12 mtpa for 25-30 years to extract 20 mtpa in less than 25 years. Given a reserve of about 350-360 million tonnes, “this way, they created a surplus,” a senior coal ministry official points out. Coal ministry sources claim that though the policy on allotment of surplus coal from captive mines was made and approved by the minister in 2011, it was “held back at the insistence of the pmo”. Retracing the chain of events, officials claim that the Empowered Group of Ministers made changes at every turn to suit Reliance Energy, including allowing it to bid and bag a second ultra mega power project without indicating the source of coal.
Goaded now by Opposition pressure to act on the adverse CAG report which has put the notional loss to the exchequer due to coal sector anomalies at Rs 1.86 lakh crore, as many as 64 cases have been referred to the CBI for investigation. Further action is being mulled after the inter-ministerial group (IMG) submits its report, say coal ministry officials.
It’s ironical that the coal ministry claims ignorance on many such matters, including change in the management of the firm that was allocated the captive block. Perhaps it’s not surprising, given the powerful political and business links at play. Drawing a parallel between the mining sector and the defence forces, coal expert S.K. Chowdhary says that we need to have a strong padlock in place and put the key in able hands. Whose hands, that’s a moot question.
There is no doubt now that the officials concerned too played a major role in either circumventing or ignoring rules in coal allocation to benefit corporate houses and their political patrons (Power Exercised, Not Generated, Sep 24). Many such bureaucrats have subsequently been absorbed by various coal mining units post their superannuation. All this speaks of a quid pro quo between commercial houses and the bureaucrats. The government should impose a ban on the acceptance of such assignments by its retired officials.
Pramod Srivastava, New Delhi
Looks like there is a lot of ‘mota maal’ going around. Wish the government would give some to the aam aadmi!
Born with Silver spoon in his mouth this guy got admission to MBA program in an american University with only a 3 years B.Com degree from Hans Raj College.
A 3 year degree will not get admission to MBA program in any American University.
His rich family must have pulled some strings.
He has donated $15 million to that University and that University has named its Business School in his name! He basically bought them out with $15 million dollars.
talkingabout Ethics he seems to have a very low standard. may be that is how his family became rich in such a short time.
In 1960's they were making Buckets. They had a small bucket factory.
It took Tatas and Birlas more then 100 years to become billionaires.
It took these people one third of that time.
Power corrupts. And absolute power lobbies for allocation of coal blocks.
Looks like there is a lot of 'motaa maal' floating around. I wish the government provided aam admi some 'motaa maal' as well. They are the ones who have been deprived of it.
It is proved that the officials concerned also played a major role in either circumventing or ignoring the rules to benefit the corporate houses and their patron politicians. The records also reveal that many of such bureaucrats are being absorbed by various coal-mining units post-superannuation. Doesn't it speak of a quid-pro-quo between the commercial houses and the bureaucrats ? The government should impose a ban on acceptance of such assignments by its retired officials especially in sensitive sectors like coal.
soon Oxford dictionary will add india as synonym for CORRUPTION
We at Outlookindia.com welcome feedback and your comments, including scathing criticism
1. Scathing, passionate, even angry critiques are welcome, but please do not indulge in abuse and invective. Our Primary concern is to keep the debate civil. We urge our users to try and express their disagreements without being disagreeable. Personal attacks are not welcome. No ad hominem please.
2. Please do not post the same message again and again in the same or different threads
3. Please keep your responses confined to the subject matter of the article you are responding to. Please note that our comments section is not a general free-for-all but for feedback to articles/blogs posted on the site
4. Our endeavour is to keep these forums unmoderated and unexpurgated. But if any of the above three conditions are violated, we reserve the right to delete any comment that we deem objectionable and also to withdraw posting privileges from the abuser. Please also note that hate-speech is punishable by law and in extreme circumstances, we may be forced to take legal action by tracing the IP addresses of the poster.
5. If someone is being abusive or personal, or generally being a troll or a flame-baiter, please do not descend to their level. The best response to such posters is to ignore them and send us a message at Mail AT outlookindia DOT com with the subject header COMPLAINT
6. Please do not copy and paste copyrighted material. If you do think that an article elsewhere has relevance to the point you wish to make, please only quote what is considered fair-use and provide a link to the article under question.
7. There is no particular outlookindia.com line on any subject. The views expressed in our opinion section are those of the author concerned and not that of all of outlookindia.com or all its authors.
8. Please also note that you are solely responsible for the comments posted by you on the site. The comments could be deleted or edited entirely at our discretion if we find them objectionable. However, the mere fact of their existence on our site does not mean that we necessarily approve of their contents. In short, the onus of responsibility for the comments remains solely with the authors thereof. Outlookindia.com or any of its group publications, may, however, retains the right to publish any of these comments, with or without editing, in any medium whatsoever. It is therefore in your own interest to be careful before posting.
9.Outlookindia.com is not responsible in any manner whatsoever for how any search engine -- such as Google, Bing etc -- caches or displays these comments. Please note that you are solely responsible for posting these comments and it is a privilege being granted to our registered users which can be withdrawn in case of abuse. To reiterate:
a. Comments once posted can only be deleted at the discretion of outlookindia.com
b. The comments reflect the views of the authors and not of outlookindia.com
c. outlookindia.com is not responsible in any manner whatsoever for the way search engines cache or display these comments
d. Please therefore take due caution before you post any comments as your words could potentially be used against you
10. We have an online thread for our comments policy:
You are welcome to post your suggestions here or in case you have a specific issue, to directly email us at Mail AT outlookindia DOT com with the subject header COMPLAINT