People's Democracy

Left Front Govt’s Stand

On Allocation of Coal Blocks   

The prime minister in his written statement laid on the table of both the Houses of Parliament amidst din, said, amongst other things, that the Left Front government in West Bengal had opposed the auction process for allocation of coal mines. This is a distortion of facts. We are reproducing below a note on this entire matter that explains the stand of the CPI(M)-led Left Front government on this matter.

IN the context of the shift of strategy of the Coal India Limited (CIL) and its subsidiaries on the issue of mining of coal in the public sector, the central government took a policy decision in the mid 2000s to open up the coal sector to the private players in keeping with its policy framework to deregulate and privatise – a departure from the hitherto-followed-policy to strengthen the public sector in overall national interest. The policy of the central government was essentially tailored on the recommendations of the Hoda Committee, which the Left Front government had found detrimental to the growth of domestic industries.

With the ‘Policy Resolution on Industries, 1994’ in place, the Left Front government was mandated to achieve its Eleventh Plan objectives with focus on the core sectors like power and steel. Keeping this perspective in view and fully sensing the unfolding realities, the Left Front government requested the  central government to allocate Coal Blocks, which the Coal India Limited and its subsidiaries were not inclined to mine, to the state government to meet the industrial requirements of the state.

The union coal secretary vide his letter No. 13016/18/2005-CA.1 dated 21st September 2005 wrote to the chief secretary to the government of West Bengal  that “the central government is considering allocation of suitable Coal Blocks to state government undertakings /companies through government route provided that the state undertakings/ companies, i.e. Mineral Development Corporation /Power Utilities etc. are authorised to undertake coal mining in terms of the provisions of their Memorandum and Articles of Association .”

Subsequently, the central government constituted a Screening Committee with union coal secretary as chairman where representatives of various state governments were invited for discussion and decision on the allocation of Coal Blocks after examining the applications received from the state governments as well as from the private entities. So far as the Left Front government of West Bengal is concerned, it  requested the central government from time to time to allocate  20 Coal Blocks in favour of the West Bengal Mineral Development and Trading Corporation (WBMDTC)/ West Bengal Power Development Corporation Ltd (WBPDCL), under State Dispensation route through Screening Committee mechanism. The state government vide Commerce & Industries’ Department  letter No. 10694 /Pr.S/C&I dated 18th June, 2007 submitted a list of 20 Coal Blocks (all located within the territorial boundary of West Bengal) for allocation.

It is to be noted in this connection that the Trans Damodar and Ichhapur Coal Blocks had already been allotted by the central government in favour of WBMDTC on 14.01.2005 and 02.08.2006 respectively. 

LF GOVT OPPOSED

PRIVATE PLAYERS

Again, the state government through chief secretary’s letter No. 314-CS/2007 dated 24th October 2007 explained the state government’s perspective for allocation of Coal Blocks under State Dispensation route as well its concern against central government’s preference for the private players which constituted a marked departure from central government’s own policy as communicated vide No. 38035/2/97-CA dated 12th  December 2001 and No. 13016/18/2005-CA.1 dated 21st September 2005.

The  state government further vide chief secretary’s DO letter No. 314-CS dated 24th October 2007 wrote: “One of the options to meet… the requirements of coal for … the projects is, of course, to ensure availability through Coal India Ltd., and particularly Eastern Coalfields Limited (ECL) and Bharat Coking Coal Limited (BCCL). However, during our discussion with representatives of CIL, ECL and BCCL, it transpired that the present availability of coking and non-coking coal with these companies do not permit them to meet these additional requirements even in the foreseeable future.

“The second option, therefore, is to ensure availability of coal to these new projects through exploration and mining of virgin coal blocks recently put up for allocation by your ministry. But, at the same time, the state government is opposed to the idea of direct allocation of such coal blocks to these companies to guard against chances of diversion, non-utilisation/part utilisation and related unforeseen possibilities. The state government would like the West Bengal Mineral Development and Trading Corporation Ltd (WBMDTC), which is a fully state government owned corporation for mining and trading operations, to operate these new Blocks for meeting the requirement of new greenfield steel and power projects in the state.

“To our surprise, however, it has been observed that the Coal Screening Committee recommended allocation of such Coal Blocks to private companies in spite of specific recommendation of the state government that such Coal Blocks should be allocated only to WBMDTC. The recent recommendation of the Screening Committee on Gourangdih ABC may kindly be referred to. The state government is also unable to understand as to why private companies are being recommended for allocation of Coal Blocks which have been specifically earmarked for State dispensation/ government company route. In fact, all the 20 that we have previously requested for allocation to WBMDTC – all being to this specific category of State dispensation /government company route, we strongly feel that private companies should not be given access to Coal Blocks which have been earmarked for the State dispensation route. Another point raised by the Screening Committee in its meeting is that WBMDTC had in itself not applied for allocation of these Coal Blocks. Since WBMDTC is only a subsidiary corporation under the state government and since the state government as the principal body has specifically requested for allocation of Coal Blocks to WBMDTC as early as December 2006 and January 2007, we feel that the issue of WBMDTC having not itself applied for these Blocks is not relevant. The state government strongly opposes any allocation of Coal Blocks to any private company particularly those which are earmarked for State dispensation /government company route.”

The state government further stated to the central government vide chief secretary’s DO letter No. 107-CS/2008 dated 8th February 2008 that “the state government is fully conscious of the paucity of coal which is a useful industry raw material and the need for its optimal utilisation. Accordingly, our whole effort is directed to providing fillip to the coal mining process simultaneously through WBMDTC and private efforts, and at the same time, boost the industrial resurgence of the state.”

VIEWS ON THE

NEW LEGISLATION

In 2008, the central government came up with a new legislative intent seeking to replace the existing Mines and Minerals (Development and Regulation) Act, 1957. The state government vide  principal secretary, Commerce & Industries, Department’s DO letter No. 2247/Pr.S dated 10th August 2009 communicated its views on the Draft MM (DR) Act 2009. A few changes were suggested. It was spelt out in the letter that the views of the state government as presented in the meeting convened by the central government in Delhi on August 10, 2009 would form part of the suggested changes. Among the views presented by the representative of the state government attending the said meeting in Delhi, the following  points deserve special mention.

“While competitive bidding for transparent and rational allocation process is a principle that cannot be faulted, the proposition neither defines the role of the states nor safeguards their interests. In fact, with this proposal the legal position, already tilted in favor of the central government, gets further distorted. Therefore, the state government urges that the power to invite applications to grant of mining lease should be devolved on the state government. However, while doing so, the qualifications of the applicants must be clearly defined and the bidding process must assign appropriate weights to the investments on account of value addition, end-use and improvement of infrastructure in the mineral bearing area.”

It was further communicated to the government of India that if the government of India persists with its proposal of vesting itself with the powers in the extant Act under the proposed amendment, the state government’s serious reservations against the proposition can be enumerated as given below:

i.                                            The Screening Committee route confers on the state governments the onus and freedom of making recommendations on the basis of value additions the end-use proponents desire to make. Despite the New Mineral Policy actively encouraging value additions, competitive bidding route will curtail such possibilities drastically, skewing further the imbalance between exploitation of mining reserves and captive mining. Needless to say, the two locations of captive mining and end-use project may not be co-terminus in the proposed regime.

ii.                                          Fast-track exploration needs, envisioned in the New Mineral Policy 2008 (NMP), would require simplified procedure to facilitate establishment of mineral reserves and inventory preparation by deploying state-of-the-art techniques, technology and equipment. This proposal militates against NMP’s stipulation of involving the private sector in a scientific and speedy prospecting and exploration process, given the Standing Committee’s caveat of only explored blocks being put to such competitive bidding. As per available information out of 17,300 sq. km of potential coal bearing area in the country, until the end of Tenth Plan, only 11,865 sq. km area has been regionally/promotionally explored. To cite a state-specific example, in West Bengal out of the total coal resource forecast of GSI of 28.32 billion tonnes, only 11.65 billion tonnes are in the proved category of which so far only 2 billion tonnes has been extracted. The hiatus between the available geological and extractable/extracted resources is too large to be ignored.

iii.                                        States like West Bengal, largely dependent on coal for thermal power generation, may get left out if competitive bidding is resorted for allocating coal blocks.

iv.                                       The financial strength of highest bidder would tilt the allocation process in favour of large companies. This would contravene the need for equity in allocation to small and medium producers, whose dependence on fuel supply linkage through public sector utilities would only grow.  The ground experience of poor qualitative and quantitative delivery management by these utilities especially after introduction of New Coal Distribution Policy 2008 is, however, not very encouraging.

v.                                         Despite abundance of coal resources in West Bengal, the state is totally dependent on coal allocation/ linkage of fuel supply by the union coal ministry for its upcoming new steel projects and ongoing power projects.  For both, its coal requirements can be easily met from existing reserves if the state is delegated the power of allocation of Coal Blocks located within its geographical boundaries. Such a step would not only save considerable money and time involved in allocation, but also substantially cut down the gestation period of these capital-intensive projects. Likewise, such decision for the power projects, whose fuel supply linkage is currently being met partly from ECL coalfields and partly from outside West Bengal, would end the criss-cross movement of coal, besides huge logistics operations for rail-road movement, rake availability and supply chain sustenance.

vi.                                       Production of steel, cement and sponge iron requires higher grade of coal with some specific properties while for power generation any kind of coal can be used. Sub-optimal utilisation of higher grade of coal in the competitive bidding process cannot be ruled out.

vii.                                     The Standing Committee has rightly highlighted the need for creation of Area Development Authorities for improving the community welfare and peripheral development in the mining areas through a special Local Coal Area Development Authority. Earmarking of funds for this purpose alone would leave the essential area of social development untouched by the highest bidder, as his priority would be to focus on maximum extraction in the mining area and maximum attention to end-use site.

viii.                                   The experience hitherto gained in captive mining allocation to private end-use projects does not evoke enough confidence that scaling-up of the process would accelerate the two processes of coal mining with commissioning of end-use project in a concomitant and time-bound manner.

It is necessary to mention that the government of India allocated to the WBMDTC only 6 Coal Blocks from  January  2005 to December 2007 under State dispensation/ government company route despite repeated request of the state government to allocate 20 Coal Blocks for meeting the industrial requirements of the state. 

Further, in response to the DO letter No. F-01/447 dated 7th November 2009 of the minister-in-charge of the Department of Commerce & Industries, government of West Bengal, the minister of state (independent charge) of coal, government of India, vide his DO letter No. 38036/1/2009-CA-I dated 20th November 2009 intimated that “at present there is no proposal for allocation of Coal Blocks either through government company dispensation route or Screening Committee route under consideration of the ministry.”  In response to DO letter No. F-01/AD-533 dated 11th November 2009 of the minister-in-charge, Commerce & Industries Department, Govt of West Bengal, the union minister for  coal vide his DO letter No. 38036/1/2009-CA-I dated 17th December 2009 the views communicated were no different.

The state government of West Bengal had, however, been persistent in its efforts for  having the Coal Blocks allocated through State dispensation/ government company route from the beginning. In his DO letter No. F-01/196 dated 29th March 2010 to the union minister for coal,  the minister-in-charge, Commerce and Industries, Govt of West Bengal  reiterated the same stand but to no avail. The fact, however, remains that the state government of West Bengal had never opposed competitive bidding. What it has always insisted upon is that the ‘State dispensation route/government company’ route should not be bartered away to the private companies in the interests of the states.