Scrap all coal block allocations to private firms: Parliament panel

Consumers denied cheap electricity because government failed to monitor private firms allocated coal blocks almost free of cost, says report

By Anupam Chakravartty
Published: Wednesday 24 April 2013

MiningPromise of cheaper electricity has been a major poll plank of political parties during elections. But there has been no relief for consumers. The latest parliamentary standing committee report on the allocation of coal and lignite blocks answers why there is no relief for people from high electricity bills. The report expresses dismay that consumers could not avail the benefit of cheaper electricity despite the intention of successive governments.

The reason, the report says, is that the screening committees which monitor and allocate coal blocks to private coal mining companies almost free of cost so that cheaper power is available to consumers, did not impose any strict condition on the mining companies. Since 1993, successive governments have been giving away coal blocks to private companies to enhance production; but it was only in 2012 that the government imposed a condition which would ensure these benefits reach power consumers, states the report, tabled in Parliament on Tuesday. Sixteen years after coal blocks began to be allocated to private firms, it was only last year that the companies were asked to participate in the bids for power procurement called by power distribution companies (discoms) or their authorised state agencies and enter into long-term power purchase agreement within a stipulated period of time or face deallocation.

The parliamentary panel says had the government incorporated this condition at the time of the allocation of the coal blocks, a huge number of coal blocks lying idle would have been forced to utilise the natural resource while the power consumer would have paid less to power producers. The report points out that the only winner in this deal are the private power producers, many of whom did not develop their coal blocks for as long as 13 years while some others made windfall gains by selling expensive electricity to the consumer.

Arbitrary allocations

There are other irregularities as well. For a period of 11 years, the Union Ministry of Coal did not maintain any data about the number of applications it received for mining of coal from various parts of the country. The 30-member parliamentary standing committee, headed by Trinamul Congress Rajya Sabha MP, Kalyan Banerjee, in the report that reviews allotment, development and performance of coal and lignite blocks, casts serious doubts on the policies and strategies pursued by the government since 1993 when mining by the private sector was allowed.

The committee observes that the Ministry of Coal continued to allocate precious natural resources to private as well as state mining companies in the most non-transparent procedure for 17 years, starting from 1993 till 2010. “The natural resources and state largesse were distributed to the few fortunate for their own benefit without following any transparent system; (it) was the total abuse of power by the government,” states the report.

Coal blocks not developed
  • The committee found that out of the 195 coal blocks with reserves of about 44.23 billion tonnes allocated so far for captive mining, only 30 blocks have started coal production
  • Out of 160 captive coal blocks allocated during 2004 to 2008, only two have started production
The committee expresses surprise over lack of data on applications filed by various coal mining companies, which led to arbitrary allocation of the natural resource. “Though the advertisement calling for applications for coal blocks were issued in 2005 and 2006 after putting the guidelines on the website of Ministry of Coal, no bidding process or auction was held,” states the report.

The committee also notes that in some cases despite allocation of captive coal blocks to a company by the Ministry of Coal, the company failed to develop “end-use projects” for up to 13 years. The committee found that out of the 195 coal blocks with reserves of about 44.23 billion tonnes allocated so far for captive mining, 30 blocks have started coal production and out of 160 captive coal blocks allocated during 2004 to 2008, only two have started production. Further, the committee found that the question of setting up end-use projects attached to the captive coal blocks has been completely ignored by the review or monitoring committees “giving credence to the fact that the entire exercise was not objective and transparent”.

Windfall gain for private firms

As the coal blocks remained underutilised, it resulted in the windfall profits to the private players. It was to meet the big gap in demand and supply of coal to meet the power demand of the nation that coal blocks were allocated to the private companies to enhance production. However, allocation of huge amounts of natural resources did not benefit the government in any way, as most of the coal blocks remain under-developed. The parliamentary panel notes that the review and monitoring committees adopted a lackadaisical approach in imposing fines or suggesting de-allocation of the underutilised coal blocks—as has been suggested by several other committees—which led to the losses.

The parliamentary panel, during a press meet on Tuesday, called the allocation of the coal blocks illegal. “We have recommended that all the coal block allocations since 1993 be scrapped,” said Banerjee.

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