Coal Scams Blackening State Governments : PRIVATE COMPANIES LOOTING THOUSANDS OF CRORES OF RUPEES

The Central Government had allocated coal blocks to many State Governments. The said allocations were made so that through coal obtained almost free of cost, State Governments could generate low cost power and with that the common man could benefit. But the complete opposite of this is happening. The State Governments have not been able to get out of the clutches of private companies. Through joint ventures, they are providing benefits to private companies. As a result, many State Governments are knowingly bearing the loss of thousands of crores of rupees…


lead-29sep14Suppose you want to host a big dinner at home and want the food to be cooked at home, what do you do ? Normally, you buy the rations and other required material, hire a cook or cooks, and arrange for the food to be prepared at home. In return, the cook or cooks take a fixed amount from you. This is the story of how it happens generally. But here is a special story. Suppose a cook says to you that not only will he take remuneration for preparing the food, but will also take away 50 per cent or more of the cooked food with him, will you agree? Obviously, you will never accept such conditions, because any sensible person will give remuneration to the cook for preparing the food, but will not share 50 per cent or more of the cooked food with him. Yet this is what is happening in an ongoing coal scam – and we’re not talking about the much discussed notorious 1 lakh 86 thousand crore rupees coal scam. We’re talking about another coal scam that is underway even after the infamous 1 lakh 86 thousand crore rupees coal scam. As a result, many State Governments are knowingly bearing the loss of thousands of crores of rupees. Through joint ventures, they are providing benefits to private companies. To understand this whole story let us take two examples, of Rajasthan and Chhattisgarh. Lets understand how through businessman Adani and joint ventures, loot of coal worth thousands of crore of rupees is happening in Rajasthan and Chhattisgarh.
Let’s talk about the Chhattisgarh Government first. The Central Government had allocated coal blocks to many State Governments. The said allocations were made so that through coal obtained almost free of cost State Governments could generate low cost power and with that the common man could benefit. But the complete opposite of this is happening. The State Governments have not been able to get out of the clutches of private companies.
In 2006 the Chhattisgarh State Power Generation Company Limited (CSPGCL) was allocated the Parsa Coal Block by the Coal Ministry of India for the Marwa thermal power project. CSPGCL, in its meeting of Board of Directors, held in June 2008, took a decision : to make a joint venture (JV), so that coal can be mined from the allocated coal block. In February 2009, the company issued a tender for a JV partner. According to the conditions of the tender, the JV partner could only be one who gave coal at a price lower than that of Coal India Limited (CIL) or South Eastern Coalfield Limited ( SECL). Metals and Minerals Trading Corporation of India (MMTC), South Eastern Coalfield Limited ( SECL), and Adani Enterprise Limited (AEL) applied for JV. Significantly SECL and MMTC are companies of the Indian Government and Adani Enterprise is a private company, whose owner is Gautam Adani. On October 19, 2009 Adani Enterprise Limited (AEL) was selected as the JV partner. Adani said he would give coal at 3 per cent less than CIL and SECL.
The real story starts after this. In July 2010 a joint venture was made between Chhattisgarh State Power Generation Company (CSPGCL) and Adani Enterprise Limited (AEL), the name of which was CSPGCL AEL Parsa Collieries Limited. In this JV, CSPGCL had 51 per cent shares and AEL 40 per cent. It is highly surprising that CSPGCL had got the coal block for free — it had only to mine the coal out. It is obvious that this could have been done by any mining company by taking the cost of mining, but CSPGCL made a joint venture with Adani Enterprise Limited on market rate of coal, besides giving it 40 per cent shares as well and bought its own coal from Adani at a cost only 3 per cent less than the market rate. In other words, in this whole matter, Adani, without getting the coal block, got all the benefit only by the doing the work of mining, which benefit the State Government couldn’t get out of the coal block that it got free of cost.
It is obvious, if according to this calculation the CAG estimates the loss, then this loss could be of thousands of crore rupees. In such a situation the question arises: behind this kind of joint venture what was the role of the State Government? The CAG has queried in his report that in the conditions of the tender, once the cost of F grade coal was made the basis, then why was an amendment made at the behest of Adani Enterprise Limited? The CAG has said that CSPGCL had the information that it has more quantity of D and E grade coal. It means this that the Government knowingly changed the cost of F grade coal (which is less), that was made the basis before in the tender, at the behest of Adani. Obviously, because of this, questions are being raised about the intentions of Raman Singh as well. After all, due to whose pressure did the Raman Singh Government alter the conditions of the tender?
Now let’s look at the Rajasthan Rajya Vidyut Utpadan Nigam Limited (RVUNL), an Enterprise of the Rajasthan State Government. Its story is also to a great extent like that of Chhattisgarh.

It is well known that the Coal Ministry gives coal blocks to State Governments for generation of cheap electricity.
In 2007 the Coal Ministry gave 2 coal blocks located in Chhattisgarh to the Rajasthan Rajya Vidyut Utpadan Nigam Limited. Two coal blocks in Hasdeo area of Chhattisgarh — Parsa East and Kante Basan — were allocated to RVUNL. RVUNL too instead of only doing the work of hiring (by giving the cost of mining), entered a joint venture with Adani. It would have been better if Rajasthan Rajya Vidyut Utpadan Nigam Limited (RVUNL) itself or through some Government agency had conducted the work of mining. Suppose this was not possible, then the Rajasthan Rajya Vidyut Utpadan Nigam Limited could have got some private company do this work to which it would have only given mining cost charges. But nothing like this happened. Instead, in 2008, RVUNL struck a deal with Adani Enterprise and both together formed a joint venture the name of which was Parsa Kante Basan Collieries Limited. After that a subsidiary company of Adani Enterprise, Adani Mining Private Limited did a deal for mining with Parsa Kante Basan Collieries Limited (PKCL). According to the information received, in this joint venture, Adani got 74 per cent share and 26 per cent share went to RVUNL. You can judge for yourself that when coal blocks were given free to RVUNL for making low cost electricity, then why were 74 per cent shares given to Adani? Land acquisition, mining, establishment of coal washery plant, laying down a rail line for transportation (Sarguja rail corridor) and use of coal washery rejects (inferior coal) for its own power plant are a part of this joint venture. The capacity of both these coal blocks is 450 million tons.
This is how this game of loot of coal was played. According to information available, the cost of mining coal for Adani Mining Private Limited works out to 250 Rs/ton. Adani Mining sells it to joint venture PKCL at the rate of 675 Rs/ton. After this JV sells the same coal to RVUNL at the rate of 736 Rs/ton. This is 64 rupees less than the market rate (rate of Coal India) meaning 8 per cent less. This 64 rupees is the profit of the JV. From this profit 74 per cent is Adani’s and 26 per cent RUVNL’s. That means 16 Rs/ton profit comes in the share of RVUNL. On the other hand, if RVUNL took coal on the basis of cost of mining, then it would have had to pay only 250 Rs/ton to any mining company. In other words, in comparison to the cost of coal being purchased now, there would have been a profit of more than 500 Rs/ton. But the glorious irony of the joint venture is that RVUNL is buying its own coal from someone else by paying 500 Rs/ton more.
It is obvious that the Government nor the CAG are not yet thinking seriously on this matter, but there are many questions surrounding such joint ventures. The biggest question is : on what basis did the Governments of Chhattisgarh and Rajasthan give 49 per cent and 74 per cent shares respectively for mining of coal blocks gotten almost free of cost ? If this argument be accepted that the State Governments were incapable of doing the work of mining and if a joint venture was needed, then why was this not made based on the cost of mining? The profit that these State Governments could have earned, why was it given to some private company? Therefore it is necessary that the CAG does a complete audit of all State Governments (wherever such joint venture have been formed) calculates the actual loss, and reveals how much monetary loss the country has suffered due to this new way of looting coal. The other big question: will the Central Government initiate an investigation into this new and unique way of looting or will it wait for one more CAG report?


Loss of 1549.06 crore rupees till 2012 : LOOT STILL CONTINUING

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There are 172.30 metric tons of coal in the Parsa coal block. SECL had set the price of F grade coal at 570 Rs/ton, price of E grade at 730 Rs/ton and price of D grade at 880 Rs/ton. In other words, if price of F grade coal had been made the basis, then saving of  310 Rs/ton on D grade coal, 160 Rs/ton on E grade coal would have accrued to the Government, but because of changing the conditions of coal pricing the Government had to bear a loss. Actually, even before opening of tenders, CSPGCL had called a meeting of the companies which had applied for the tender, in which AEL said that the price of giving coal be decided on the basis of original grading of the coal being extracted. Because of this the ‘condition’ for F grade was changed. In this area, coal of D and E grade is more and their price is more than F grade coal. Adani got the price of coal of original grading, not according to the previous condition of value of F grade coal for all grading of coal. CSPGCL, on the suggestion of Adani Enterprise Limited, amended the ‘condition’ related to payment of mining fees. According to this amendment, mining fees would be given for the grading of coal that will be extracted on the basis of cost of that grading, the cost being decided by AECL. As a result, according to the CAG, the State Government had to bear a loss of 1549.06 crore rupees. However, this report of the CAG is of 2012 and under JV this game is still going on. As per these calculations the loss till now would have reached the figure of approximately 5000 crore rupees.


HUGE LOSS

The  Supreme Court while hearing petition no.120/2012, gave its decision on August 25 this year. The Supreme Court cancelled all blocks allocated from 1993 to 2010. In its 163 page long verdict the Supreme Court has said that it is against the Coal Mines Nationalization Act that the Central Government gave permission to State Government for commercial mining. Talking to Chauthi Duniya, energy expert and social worker Sudeep Srivastava says that when the Supreme Court has held all coal blocks illegal, then in such a case all joint ventures and MDO contracts done by State Governments will automatically be considered illegal. According to this view, joint ventures made by Rajasthan and Chhattisgarh including other State Governments with private companies should stop working with immediate effect. Alongside, the CAG should, by putting this whole matter together, reveal how much loss, how many thousand or lakhs of crore rupees to this country’s exchequer have been lost in the name of joint ventures with private companies. This is important, because as per the report of the CAG, for Chhattisgarh alone, till 2012, the Chhattisgarh Government had borne the loss of 1550 crore rupees. Now if losses in other States due to joint venture are added up till date, then the figure of this loss can be huge.


Disadvantages Of Joint Ventures : DOUBLE BLOWS
If a joint venture was required, then it should have been with the company mining the coal.
The deal should have been on the mining cost, not on market rate.
The coal block was received for free, yet the Government bought its own coal from Adani at a rate only 3 per cent less than the market rate.
The profit that should have gone to the Government went into the account of Adani.
As a result, there was a double blow — the Government had to bear a loss and the public didn’t get cheap electricity.

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