Lets Burn Coal!!

---The “Coalgate” Scam

Presenters:

Parnamoy Dutta (13)

Malvik Majithia (24)

Introduction:-

What this article is about?De-allocation of coal mines.

○ e.g: Excess allocation to RIL.Production did not meet expectations.Allocated at throwaway prices.

Who are involved?Ministry of Coal.Ministry of Finance.Power and Steel companies.Prime Minister’s Office.

Coal and the Indian Economy:- Accounts for 67% of total energy

consumption. Meets 52% of primary commercial energy. 66% of power generation is coal based. Mining Sector contributes 2.25% to the

GDP. Industry Sector which is the main consumer

contributes to 14% of the GDP.

Some more numbers:-

58 coal blocks stuck due to external

factors

23 coal blocks de-allocated

till December

2011

18 blocks expected to start production

soon

9 coal mines in

full production

218 coal blocks allotted so far

The Scam:- Companies with no prior experience in mining

were allotted coal blocks. Allotment based on recommendations from

various high profile individuals. 17 companies who didn’t show up at the before

screening committee were allotted coal blocks. Screening committee was made most powerful

within 5 months of UPA 1. Windfall gains to private players. “No-bid” process.

Why Preferential Allotment:- Defensive Government Strategy due to:

Concerns of State Governments.Need to amend associated acts.Gestation period of 3-7 years.To keep the prices low.

Corruption. For interests of CIL.

Why is the government under scanner?

High cost of merchant power. Low production of coal. Gestation period of most mines are over. Even after repeated reports of audit

committees auctioning was not implemented.

Government actions:- Asked for show-cause notices from operators of

58 coal blocksprovide details of investmentsprovide progress on projectsprovide details of mine development

De-allocation for those whoHave not seriously followed up for clearancesHave not invested in setting up end plants

CBI will investigate allocations done in a “wrongful manner”.

IMG’s recommendation after investigation.

Pros• Freeing of

resources for judicious use

• Better pricing of end products

• Incentive to NPAs

Cons• Diverse effect on

Banking sector• Conflicts with

Environment Ministry

• Could lead to an oligopoly

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