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Coal blocks allocation cases explained:

  Oct 23, 2020

Coal blocks allocation cases explained: Allegations, investigation, and what next

Q. Why is this in news? 

  • Last week, a special CBI court convicted Dilip Ray, Minister of State for Coal in the A B Vajpayee government in 1999, for his alleged involvement in the coal block allocation scandal. Hearings on the quantum of Ray’s sentencing are set to begin, While convicting him, the court observed that Ray “abused his official position”, as his decision of “relaxation of policy without any logical or legal basis amounts to gross abuse of his powers by the minister”.

Q. Why it is significant?

  • The 2G spectrum scam and the coal blocks allocation cases were among the most loss bearing corruption cases. Comptroller and Auditor General (CAG) reports on the two matters had put the loss to exchequer at Rs 1.75 lakh crore and Rs 1.8 lakh crore respectively with the latter being called “the mother of all scams”.
  • While there have been several convictions in the wide range of coal blocks cases, this is the first time that an NDA minister has been convicted. When the allegations surfaced, Ray was a member of the BJP.

Q. What is The coal blocks scam?

  • In the early 1990s , the government decided to allocate such coal blocks to private companies that were not part of the production plan of PSUs Coal India Ltd and Singareni Collieries Company Limited (SCCL). Initially a list of 143 coal blocks was prepared, later inflated to 216. At that time there were no concrete guidelines for allocation of blocks as coal mining was largely restricted to PSUs and many geographic locations were seen as unsuitable for profitable mining. The guidelines were periodically revised through 1993, 1998 and 2003.
  • Between 1993 and 2005, 70 coal mines were allocated. Then between 2006 and 2010, a further 146 blocks were allocated taking the total tally to 216. However, some blocks were de-allocated owing to companies not starting work and the final list stood at 194.
  • In March 2012, a leaked draft report of the CAG revealed irregularities in the allocation of blocks and pegged the loss to the exchequer at Rs 10.76 lakh crore. Although the CAG’s final report tabled in Parliament in August 2012 whittled down the loss to Rs 1.8 lakh crore, it was still the biggest scam India had seen. The CAG had argued that the government had the authority to auction the coal blocks but chose not to and as a result allocatees received a “windfall gain”.
  • As the Opposition targeted the Manmohan Singh government on corruption, BJP leaders Prakash Javadekar and Hansraj Ahir approached the Central Vigilance Commission (CVC) with complaints. The CVC referred them to the CBI which over the next few months registered over 40 FIRs. Meanwhile, a Parliamentary Standing Committee report said coal blocks distributed between 1993-2008 were done in unauthorised manner, bringing even the NDA period under scanner. The Supreme Court took matters into its own hands directing the CBI to directly report to it and not the government.

Q. What was UPA’s defence?

  • Then PM Manmohan Singh rebutted allegations of fraud and even questioned CAG’s computations in Parliament. He had argued that West Bengal, Chhattisgarh, Jharkhand, Orissa and Rajasthan — which were ruled by Opposition parties then — were strongly opposed to a switchover to competitive bidding as they felt it would increase the cost of coal, adversely impact value addition and development of industries in their areas and would dilute their prerogative in the selection of lessees.
  • On the idea of “windfall gains”, Singh said computation of extractable reserves based on averages would not be correct. He said the cost of production of coal varies significantly from mine to mine even for CIL due to various conditions. He pointed out that CIL had been generally mining in areas with better infrastructure and more favourable conditions, whereas the coal blocks offered for captive mining were generally in areas with more difficult geological conditions.
  • Arguing against a loss to the exchequer, Singh said part of the gains would in any case get appropriated by the government through taxation, with corporates being made to allocate 26% of their profits for local area development.

Q. What is its State of the probe? 

  • The coal blocks allocation cases are among the CBI’s longest running probes, with the agency last registering a fresh FIR in the case in January 2020. It has since 2012 filed multiple charge sheets and even closed many cases for lack of evidence or culpability.
  • Unlike the 2G spectrum case, where all the accused have been acquitted, CBI has secured multiple convictions in the coal cases. Through 2017 and 2018, a special CBI court convicted former Coal Secretary H C Gupta in three different cases. Two other bureaucrats — K S Kropha and K C Samria —were convicted in two of these cases. They were all sentenced to imprisonment of two-three years. The court also sentenced several office-bearers of companies associated with these cases.
  • In the Vini Iron and Steel case, where HC Gupta had been convicted, the court also convicted and sentenced former Jharkhand chief minister Madhu Koda to three years of imprisonment.