The least that the Prime Minister can do is to order immediate cancellation of all coal mine allocations. Else, he awaits another legal quagmire a la 2G spectrum.

Prime Minister Manmohan Singh’s defence of his Government resorting to allocation of coal blocks for captive mining, sans any competitive bidding, cuts very little ice. In his statement in Parliament, Singh has held that the blocks were awarded only after inviting applications through open advertisements. But that still does not explain how, in one particular case, out of 69 applicants, only 36 were selected to make presentations before an inter-ministerial Screening Committee, which then allocated the block to two parties. Or how, in another case, only two out of 108 applicants were chosen to make presentations and eventually six firms were given the rights to jointly develop the blocks. In none of these instances, any recorded minutes or documents existed, showing how the Committee – also having representatives from State governments – undertook comparative evaluation of the various applications prior to the final award. In short, no transparent method for allocation was followed, which is precisely the point the Comptroller and Auditor General of India has raised in its report.

Instead of responding to these specific charges, the Prime Minister’s statement has cited objections from the States – including those ruled by opposition parties – to the idea of auctioning coal blocks. This is a pseudo-federalist argument, simply because coal, unlike limestone or granite, is a major mineral falling directly under the Centre’s jurisdiction. Policymaking in this case was, therefore, its prerogative. Nor was any legislative amendment needed for switching over to competitive bidding. While opening up of commercial mining to private players may have required changes to the Coal Mines (Nationalisation) Act – a potential political minefield – introducing competitive bidding for allocation of blocks for captive purposes could have been done through normal administrative instructions. The Law Ministry had, in fact, confirmed this in August 2006. Both the ‘federalist’ as well as political minefield theories, it would seem, were convenient alibis for persisting with a flawed policy of awarding mining concessions (even for so-called captive use) in the most non-transparent manner.

The other justification for allocating coal blocks without going through the ostensibly time-consuming procedures of auctioning – to somehow boost production in the short to medium term keeping in view growing power shortages – is no less specious. If anything, by getting a natural resource virtually free, there is no real urgency to exploit it. The allottees, indeed, have more incentive to squat than to develop the mines. Proof of it is the fact that of the 57 open cast mines awarded to private parties between May 2005 and June 2009, only one is producing today. It is unfortunate that the Prime Minister has only grudgingly acknowledged this reality. The least he can do is to order immediate cancellation of all these allocations and instead opt for the auction route, without waiting for the Supreme Court to give yet another 2G spectrum-like ruling.

(This article was published on August 28, 2012)
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