Coal scam, environment issues & clearances: Rs 145,000 crore stuck on projects linked to blocks

Coalgate continues to snowball. First there was the filing of FIRs against former coal secretary PC Parakh and industrialist KM Birla. Then came news of an earlier letter written by Parakh himself (when he was secretary) claiming that the real ‘coal mafia’ was within the coal ministry itself.

And as the scandal involving inefficient, opaque and arbitrary allocation of coal blocks reaches well within the corridors of the Prime Minister’s Office, Manmohan Singh has been painted into a corner. Earlier this week he stated that he was not ‘above the law’ and ‘was willing to be investigated’. But beyond the fate of individual industrialists, politicians and bureaucrats, there is a problem that runs into several hundred thousand crore.

A recent document compiled by the coal ministry on the status of various captive coal blocks shows that, as of December 2012, around Rs 145,000 crore had been spent on projects linked to those blocks – power projects, steel projects and so forth – and which are now held up due to various problems. The roadblocks include the inability to receive various types of clearances, or are courtesy of many of the sub investigations into the coal blocks allocation scandal.

The projects that are stuck include those of India’s biggest industrialists like the Ruias of the Essar group, Anil Agarwal of Vedanta Resources, Naveen Jindal of Jindal Steel & Power Ltd (JSPL) and Kumar Mangalam Birla of the Aditya Birla group, to name just four.

Even the Rs 145,000 crore figure is an underestimate. Firstly, it covers about 114 blocks out of 190-odd blocks which were allotted to various companies since the early 90s (though the balance would include blocks that have been since de-allocated). But, beyond this, there is a bigger problem that goes well beyond Coalgate: following the captive block policy of the UPA – which essentially involved a clearly corrupt process of allocating coal mines to random individual players including among others a manufacturer of ayurvedic medicines – a huge clutch of power and steel companies were effectively denied access to the coal within those blocks.

A quick scan of another document prepared by the finance ministry on delayed projects in various infrastructure sectors leads to a rough estimate of well over Rs 50,000 crore worth of power projects alone that have been delayed due to lack of a fuel supply agreement from Coal India (as of December 2012), the largest coal producer in the world with a monopoly on domestic production.

A major reason cited for the coal shortage, quite apart from the criminal investigations into captive block allocation, is the slow pace of environmental and forest clearances to blocks already allocated. To what extent is that the case?


The coal ministry classified blocks into those that were already in production, those nearing production and so on. Thirty eight blocks are described as having ‘unsatisfactory progress’, where the blocks are either in no-go areas or are where environmental or early-stage forest clearances have not been received. The total amount involved in the end-use projects linked to these blocks is around Rs 117,867 crore.
The so-called ‘no-go’ areas are those classified as particularly densely forested areas and are therefore unlikely to get a clearance to mine – there was thus little point in applying for such a clearance in the first place. The ‘go/nogo’ approach was brought in by Jairam Ramesh when he was environment minister and was backed by institutions such as Coal India.

The idea was scrapped after fierce opposition from other sections of industry. Incidentally, data from the environment ministry shows the time taken for a forest clearance for coal blocks has come down from a period of five years in 1982-99 to 11 months by 2010-12. Despite the clear-cut distinctions in the coal ministry document, actual reasons for delays are much more complex. Take the case of Odisha’s Rampia blocks which were allocated among a who’s who of Indian industry – Sterlite, GMR, Lanco, ArcelorMittal and Reliance Energy among others in 2008.

The CBI has filed an FIR in the case against one of the allottees, Navbharat Power. But persons within Rampia Coal Mine & Energy Pvt Ltd (RCMEPL), the joint venture company formed by the partners, point to a further complex set of factors.

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