(Weekly Organ of the Communist Party of India (Marxist)
September 02, 2012
Coal Scam: Wages
THE report of the
Comptroller and Auditor General (CAG) on the allocation of
coal blocks has revealed how chunks of the coal resources of
the country have been handed over to private companies to
enable them to make windfall profits. According to the
CAG, the allocation of captive coal blocks to private
companies is likely to result in Rs 1.86 lakh crores financial
gain for these companies.
The captive coal
block allocations are part of the UPA government’s policy of
facilitating the loot of natural resources by the big
capitalists and corporates.
This is what has happened in the case of natural gas,
land and spectrum allocation.
The CAG report, of
course, does not deal with the overall thrust of the
successive governments at the centre since 1991 to privatise
natural resources like coal.
It has conducted a performance audit covering the
period 2006-07 to 2010-11 and the allocation of coal blocks by
the ministry of coal from 2004 onwards.
In the case of coal,
both the NDA and the UPA governments ran up against an
coal mines were nationalised in 1972-1973. The Coal Mines
(Nationalisation) Act was adopted in 1973. Despite the best
efforts of the Congress and BJP led governments, they could
not succeed in amending the Act to allow entry of the private
sector in coal mining. The
Coal Nationalisation Amendment Bill to allow private sector
entry was introduced in parliament in 2000 by the NDA
it has not been adopted yet.
The coal workers’ unions and the entire trade union
movement in the country were resolutely opposed to the
privatisation of coal mining.
There were a series of strikes by workers in the coal
mines against the privatisation move.
It is in order to
overcome this difficulty that the “captive mines” allocation
route was devised. In
amendments to the main legislation in 1993 and 1996, companies
engaged in power generation and cement production were
permitted to have captive coal mines. This was in addition
to the already existing provision enacted in 1976 which
allowed iron and steel producers to have captive coal mines
for their use.
The guidelines for
allocation of captive mines had initially stated that
allocations can be made to end users, i.e., steel or power
producers. But this was diluted in 2006. Now, a mining company
which has a contract to supply coal to an end user can be
allocated coal blocks.
It is in this way
that the screening committee set up by the ministry has
allocated coal blocks, many of whom are now found to have not
mined the block, or sold it to another party. Already the CBI is
investigating some of the allocations and cases of fraud and
other criminal charges are expected to be filed.
The handing over of
captive coal blocks picked up momentum after 2000. The main
argument advanced for this was that the Coal India Ltd (CIL)
and its subsidiaries are unable to meet the growing demand for
coal for power generation and other purposes. The bottlenecks due
to the lag in meeting coal production targets were affecting
the development of steel, cement and other allied industries.
This was the pretext for systematically undermining and
downgrading the public sector coal enterprises. Instead of taking
steps to streamline the CIL and set right the deficiencies and
the corrupt and wasteful practices in the coal sector, both
the Congress and the NDA governments worked to create a
situation where the private sector would get entry and
ascendancy in the coal sector.
The CAG report
exposes the fallacy of the captive mining-privatisation route
which was adopted. According to the report, in the Eleventh
Plan period (upto 2010-11), 86 coal blocks were targeted to
produce 73 million tones. Instead, only 28 blocks (of which
only 15 blocks allocated to the private sector) produced 34.64
million tones during 2010-11.
This was a shortfall of 52.55 per cent of coal
production from the captive coal blocks. There are 68 blocks
which have not begun production at all.
The captive mines
policy had been actively utilised by the ministry of coal to
weaken the CIL and prevent the expansion of public sector coal
ministry had, despite the objection of the CIL, de-reserved
coal blocks under its purview; further the request of the CIL
to the ministry of coal to allocate 116 blocks with 49,790
million tones of reserves for itself has not been cleared. The CAG report notes
that this will adversely affect the production plan of CIL.
The prime minister’s
statement tabled in parliament is a brazen attempt to defend
an indefensible policy. Under the prime minister’s watch and
the two ministers of state in the coal ministry, concerted
efforts were made to push ahead with this venal system of
allocating coal blocks. As late as 2010, the PMO intervened to
stop a ministry of coal directive which barred excess coal to
be mined by the captive coal blocks and which stated that such
excess coal should be handed over to CIL. The PMO backed the
companies that wanted to utilise the surplus coal mined. (Another CAG report
has indicted the government for allowing Reliance Power Ltd to
use excess coal from the blocks allocated for Sasan power
project.) The UPA
government and the Congress leadership cannot escape
responsibility for this latest case of high level corruption.
The BJP’s hypocrisy
in disrupting parliament demanding the prime minister’s
resignation is breathtaking.
It had pioneered the captive coal block route. It had
brought the coal privatisation bill in parliament. The NDA government
had deregulated coal pricing and taken a series of steps to
weaken the CIL. The BJP state governments in Madhya Pradesh
and Chattisgarh have followed the same pattern in handing over
coal blocks to fraudulent companies. Both the Congress and the
BJP have been engaged in the game of allowing big business to
loot natural resources.
It is clear that the
“captive mines” route of privatisation has led to selective
allocations, violation of norms set by the ministry itself,
transfer of the captive mines to other parties for quick gains
and windfall profits for some companies.
The outcry resulting
from the CAG report has focused on the need for a system of
competitive bidding to allocate coal blocks. Competitive bidding would be better than
the present system if it is the question of eliminating
corrupt practices and favouritism in the allocation of coal to
private parties. The
main issue, however, is whether the coal industry is to be
privatised or not. As
far as the CPI(M) is concerned, it is resolutely opposed to
the privatisation of coal sector. That is why it has
been opposing the use of the captive coal block route to
introduce private companies into the coal sector. Coal is a fossil
fuel and non-renewable natural resource. Millions of domestic
consumers and thousands of small and medium industries are
dependent on coal as the main source of power and energy. Coal has to be used,
therefore, in a carefully planned manner in order to promote
growth, sustainability and equity. The State holds
these reserves in public trust and it should not be viewed as
a means of maximising revenue or enabling windfall profits for
That is why mining
of coal has to be done by the public sector. If private sector
power and steel plants require coal, the allocation should be
done through the nodal agency – the CIL. Dedicated blocks can
be provided for such enterprises with the mining done by the
CIL and its subsidiaries.
In the states, state-run mining corporations can be
involved in this process.
This should meet the requirements of power generation
in the private sector, steel production etc.
bidding, or, auction route for coal can create serious
bidding would favour the large private players; it would lead
to private monopolies and cartels forming. Public utilities and
state government-run corporations will not be able to compete. Further, as the
experience shows in the coal block allocation so far, it will
not be possible to ensure the end-use provision. Another aspect of the
competitive bidding for coal will be pushing up the cost of
power generation and the resultant pressure on the regulated
tariffs in the power sector.
states have made the valid point that the interests of the
states’ industrial development and energy needs can be met
only if the state governments have a say in the allocation of
coal blocks within their state.
The stand taken by
the Left Front government in
The Left Front
government’s reservations on going for an outright competitive
bidding route has been distorted in sections of the rightwing corporate media. It has also been
twisted by Arvind Kejriwal and company belonging to the India
Against Corruption group.
What these forces want, knowingly or unknowingly, is
the selling off of the coal assets of the country by
competitive bidding which would usher in the privatisation of
the coal industry.
The coal block
scandal which has engulfed the Manmohan Singh government
should be an opportunity not only to identify the perpetrators
of the “loot the resources” policy but also to demand a
reversal of the privatisation of natural and mineral
A high level
investigation is required to fix responsibility for the
irregularities and corruption involved in the coal block
found guilty have to be prosecuted. All allocations
which have been made irregularly have to be cancelled. In all the instances
where windfall profits have been made, steps must be taken to
recover the losses suffered by the government.
While all these need
to be done, the CPI(M) and all those who wish to see an end to
the loot of natural resources will demand that the coal
allocations and mining be done through the public sector in