"Coal mafia is not outside the government. It exists within the Ministry of Coal," wrote P.C. Parakh, the then coal secretary to the then cabinet secretary B.K. Chaturvedi on March 22, 2005.
Parakh who is now an accused in the CBI's investigation into the coal block allocation scam went on to add: "There is large-scale black marketing and generation of black money through patronage of coal mafia in the current system of marketing of coal"
Parakh has been accused of favouring industrialist Kumar Mangalam Birla's firm Hindalco in an allocation which the CBI states was cleared by the "competent authority", in what is being seen as a possible reference to the prime minister.
Parakh's explosive letter was an angry response to the five-page show-cause notice served by the cabinet secretary on February 12, 2005, based on the then tainted coal minister Shibu Soren's letter of February 7, 2005 to the prime minister, charging his ministry's secretary of being an "NDA man" who was "disobedient" and "hiding information on the coal mafia."
Tainted Coal Minister
The appointment of JMM chief Soren as the minister of coal when UPA first came to power in May 2004 had become a sore point with the opposition because of serious criminal charges against him. He was forced to resign from the coal ministry on 24 July 2004 due to a court order in a murder case. But he was able to secure bail after spending over a month in judicial custody; released on bail on September 8, he was re-inducted into the cabinet and given back the coal ministry on 27 November 2004, as part of a deal for a Congress-JMM alliance before assembly elections in Jharkhand in February 2005. After much political bargaining and quid pro quo he was invited to form the government in Jharkhand by the governor of Jharkhand on 2 March 2005 but resigned as Chief Minister nine days later, on 11 March, following his failure to obtain a vote of confidence in the assembly. He was then back as coal minister and stayed on till he was forced to resign on 28 November 2006 after being found guilty in a 12-year-old case involving the kidnapping and murder of his former personal secretary Shashinath Jha.
So it is in this context that we should view his letter of February 7, 2005 where he had complained to the PM:
"My secretary has a style of functioning that has no blend of procedure, harmony and respect for political leadership. To his convinces (sic), he flounders (sic) rules of business executive working with the intention of bypassing the ministers...
"I have to reluctantly take a view that it may not be appropriate to continue any further with the present secretary. I, hence, request the prime minister to finally consider to substitute the present incumbent with a suitable alternative."
Parakh had responded by saying that there was pressure on him to block CBI’s applications for sanction for prosecution on several tainted officials:
“There is no gainsaying that I have had difference of opinion with both Minister of State [Dasri Naryana Rao] and Cabinet Minister [Shibu Soren] on several issues of policy and administration. I have found nothing of substance in the note for which I can be faulted.
“Entire five page note [show cause by the cabinet secretary] does not refer to a single instance where I have bypassed the Ministers or not implemented any written orders issued by them. I have always been polite and courteous in my written and oral communications with the Ministers and complied with all written orders even when I had serious difference of opinion.
“However, if respect for political leadership implies complying with oral orders or recording notings that suits Minister’s interest, as against public interest, I am perhaps guilty of alleged short-comings,”
" …In my understanding I have performed my duties in the manner that is expected of member of Civil Service. As a Secretray to the Government, I am deeply conscious of the fact that I cannot effectively discharge my responsibilities without full political support from my Ministers. However, I am at a loss to understand as to what could be done."
While JMM's Soren was the minister for coal during the period May 2004 to July 2004 and then again from Nov 2004 to Nov 2006 (barring the short period he stayed away because of Jharkhand chiefministership of 9 days in March 2005), Congress party's own Dasri Naryana Rao was the minister for state for coal during the entire tenure of UPA 1 and has been already been named in an earlier round of FIR by the CBI for irregularities in allocation of coal blocks to Congress MP Naveen Jindal’s firms.
Soren's letter to the PM alleged that he had sent a note to Parakh, seeking information on dealing with the coal mafia as well as his views on a new policy, but there was no response, to which Parakh responded:
“As regards dealing with coal mafia, the Minister perhaps has far more knowledge about operations and strength of coal mafia as he comes from a State where stronghold of the coal mafia is strongest. Coal mafia is not outside the Government. It exists within the Ministry of Coal, Coal companies, trade unions, State administrations and local political leadership. There are no easy and short cut solutions to the problem of coal mafia in the current political and administrative milieu of the country.
“Dealing with coal mafia required strong political commitment at Central and State governments’ level and ability to effectively enforce law and order which does not exist. I had no solution to offer to the Minister apart from bringing about structural changes in the operations of coal industry for which Ministers have shown great reluctance”
"There was a lot of discussion about the motives of the secretary in the coal trade. Immediately on my taking over as the minister of coal, MPs requested me to investigate. I received written complaints from them too."
"As regards complaints from members of Parliament, lesser said the better. I had heard that signatures of MPs can be obtained for a price on any piece of paper...."
"I am sorry to say that MPs who swear to uphold the Constitution can with impunity indulge in blackmailing civil servants and senior executives of PSUs to meet their personal ends. It is unfortunate that the country has no institutional mechanism to stop such misconduct on the part of lawmakers"
Soren's letter charged:
"With regard to mechanism of allocating captive coal blocks, while the entire range of industry, including their administrative ministries, was opposed to captive bidding for various reasons, the secretary preferred to mislead as if the industry was in favour of it."
Parakh, who from the very beginning had favoured competitive bidding in allocation of captive coal blocks, marketing of Coal through internet based e-auction and streamlining process of project approvals, wrote back that while their were opinions for and against competitive bidding,
"However, there can be no doubt that such a system will be far more transparent than any system that is based on subjective considerations. With both minister of state [Dasri Naryana Rao] and minister of coal [Shibu Soren] were strongly opposed to the idea, prime minister as minister [Coal, during the time that Soren had to spend out of the cabinet] had approved the proposal".
The current controversy is over discretionary allocation of coal blocks during the time when the PM also held the extra responsibility of the coal ministry, from November 2006 to May 2009.
Competitive bidding as the basis for allocating coal blocks was first proposed on June 28, 2004, in a meeting under the chairmanship of Parakh, the then coal secretary. On July 16, 2004, Parakh submitted a comprehensive note to Dasari Narayana Rao, then the minister of state for coal and mines, pointing out:
"... since there is a substantial difference between price of coal supplied by Coal India Ltd and coal produced through competitive mining, there is a windfall gain to the person who is allotted a captive block..."
Under such circumstances, the coal ministry thought that auctioning was the best way out, as it was "transparent and objective" and would also add more revenue in the government's kitty. But the proposal was consistently stonewalled.
On Sep 11, 2004 the PMO came up with a note listing the demerits of the auction process. Dasari Narayana Rao insisted that the competitive bidding proposal may not be pursued any further;
"as it would invite further delay in the allocation of coal blocks, considering that the Coal Mines (Nationalisation) Amendment Bill, 2000, envisaging competitive bidding as a selection process for allocation of coal blocks for commercial purposes, was pending in the Rajya Sabha".
In October 2004, Parakh's note clearly states:
"The policy was discussed in the PMO, and it was felt that since a number of applicants [had] requested for allotment of coal blocks based on the current policy, it would not be appropriate to change the allotment policy through competitive bidding, in respect of applications received on the basis of the existing policy."
Parakh's letter to the cabinet secretary adds:
"after the PM's decision to continue the present system of allotments, five screening committee meetings were held in the last 4 months (of 2005). And in such time more companies were allotted blocks than in the previous 10 years".
On April 7, 2006, the PMO, directed the mines ministry to amend the MMDR Act, 1957, so that competitive bidding could be extended to all minerals, thus taking the much longer route instead of taking the easier and faster route of an administrative order. And the process of discretionary allocations continued merrily in between. The bill to change the law was finally introduced on October 17, 2008 and passed only in August 2010. The notification of course took two further years.