In March 2012, a draft report by the Comptroller and Auditor General (CAG), an institution established by the Constitution of India, accused the government of inefficient allocation of coal blocks from 2004 to 2009.28 It estimated that because of this, gains of Rs 10.67 lakh crore had been made by the allottees.29
This was when a matter of inefficient government procedures became a political issue. On a complaint by two members of Parliament from the opposition, the Bharatiya Janata Party, the Central Vigilance Commission directed an enquiry into the matter, to be conducted by the Central Bureau of Investigation (CBI). Meanwhile, the prime minister at the time, Manmohan Singh of the Congress, offered to give up public life if found guilty of any misconduct related to the coal blocks allocation.
In August 2012, the CAG’s final report was tabled in Parliament. The report toned down the ‘potential’ losses to the exchequer in the draft report, earlier calculated to be Rs 10.67 lakh crores, to Rs 1.86 lakh crore.30 This amount was arrived at in the following way: 6.2 billion tonnes of coal reserves x Rs 295 per tonne = Rs 1.86 lakh crore.
But there is a problem with the 6.2 billion tonnes figure, because it assumes that 100 per cent of the estimated reserves of all 218 captive coal blocks had been mined over thirty years. This, despite the fact—which even the CAG writes it in its report—that only forty of the total 218 blocks were operational, whereas the remaining had been lying undeveloped. Therefore, a much lesser amount of coal would have been ‘potentially’ mined from the operational captive coal blocks over twenty years, and not 6.2 billion tonnes as assumed by the CAG. The government also pointed out that the CAG’s presumptive loss theory was flawed, as mining in many of the coal blocks mentioned had not even begun yet.31
I even see a problem with the Rs 295 per tonne figure. The calculation methodology used to arrive at this figure is based on the difference between the average price realization of CIL and the average cost of CIL only in 2010–11. However, firstly, CIL’s annual reports between 1993 and 2010 show that its margins have been significantly lower than Rs 295 per tonne. Secondly, many of the private companies were mining coal of a much lower grade than what CIL was mining, and the prices of this low-grade coal were much lower than that of CIL in 2010–11.
Is it illegal in this country for private companies to make legally accrued financial gains? In case corrupt or unfair practices have been used in the allotment procedure, by all means those cases must be investigated. But what about those who followed due legal procedures to develop their mines? If we consider the allegation that the government had allocated coal blocks to companies in a highly unsystematic way, why are private companies to pay the penalty for the inefficiency of the government? We often tend to skim the surface of an issue and take away a simplistic reading of it. For example, the CAG report of 2012 implied that if competitive bidding had been held by the government since 1993, a part of the Rs 1.86 lakh crore would have gone to the government. It did not say that the government incurred a ‘loss’ of Rs 1.86 lakh crore, which was the popular assumption.
More dramatic events were to follow. In April 2013, a report from the Standing Committee on Coal and Steel said that from 1993 to 2010, natural resources had been distributed without following a transparent system and without generating revenue for the central government.32
In May 2014, the BJP-led coalition government had come into power. On 25 August 2014, the Supreme Court ruled that all coal blocks allocated by the government between 1993 and 2010 were ‘illegal’.33 Within weeks, on 24 September, the Supreme Court de-allocated all coal blocks allocated between 1993 and 2010 with the exception of those allotted to government companies with no joint ventures, and the ones used for large power projects classified as Ultra Mega Power Projects.34 Forty of these blocks were coal-producing blocks. Further, the popular perception of the Rs 1.86 lakh crore ‘loss’ to the government led to a Supreme Court order, in September 2014, that all private coal producers whose operational mines had been de-allocated must pay the government Rs 295 per metric tonne of coal they had ever extracted in the past from the coal block.
Such a retrospective amendment of the law caused mayhem. Banks that had lent money to these businesses panicked.35 Investor confidence in India dropped—foreign investors were aghast that Indian courts could just scrap 204 of 218 coal blocks, allotted by the government to different companies over more than twenty years, without any investigation of individual cases. They asked if there was any guarantee that some court would not scrap a deal sanctioned by the government on the basis of a report in the future.36 Why did the government not salvage at least the coal-producing mines that producers had worked hard to develop with technology and investments? Why were coal producers being retrospectively charged for extracting coal, as if it was their fault to have developed the mines? The alleged ‘illegality’ of mines that were duly allocated by the government just did not make sense to investors.
As part of the top management at the Jindal Group, I was right in the eye of this storm. From this vantage point, I was amazed to watch how a matter of alleged government inefficiency (in the allocation of coal blocks since 1993) was conveniently turned into one of corruption by individuals. The entire narrative, I felt, had been transformed to feed a simplistic story to the masses. The
