On issues that matter …

The Dark side of Coal August 28, 2012

Filed under: Uncategorized — Srirekha @ 9:54 pm
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The word ‘scam’ (short for scandal) and highly irritating use of the postfix ‘gate’ (a la Watergate) to describe a scandal have become so commonplace in Indian media parlance that I wouldn’t be surprised if Oxford or Webster’s dictionary compilers pick them up for their next edition.

‘Scams’ seem to be breaking out in the country faster than the rabble rousing television news channels can flash their ‘Breaking News’ banners across the screen. The latest scam consuming the 24-hour news channels as well as precious news print is what has been termed ‘Coalgate’.  For all the accusations, justifications, denials, debates and discussions on these channels over the past few weeks, not many of us ordinary media consuming mortals know what exactly the problem is.

So for all those shunted out by the general cacophony in the news, here’s a ‘dumbed’ down attempt at explaining what the coal scam is all about:

  1. In 2004, the Prime Minister expressed publicly his government’s intent to auction coal blocks to the private sector. However, till date the legislation to the effect is yet to be implemented.
  2. In this intervening eight years, the same government allocated coal mines to several private companies on a discretionary basis, under dubious circumstances.
  3. The Controller Audit General (CAG), a constitutional body which audits all government activities, revealed two weeks ago that the government has helped private companies to gain an estimated Rs. 1.86 lakh crores, which would have possibly accrued to the exchequer had the same been auctioned, instead of making discretionary allocations to private miners.

Taking it up a notch, I’d say coal mining is a complex activity, and has several classifications like captive coal mining for steel industries, captive coal mining for power companies, open market mining etc.  The government itself is the largest consumer of coal, as most of the power generated in this country is by government or public sector companies. Besides, even if power is generated by private companies, the power tariffs are government regulated. So the input coal cost is important in order to fix the power tariff.

Similarly steel prices also fluctuate based on coal prices, and the government prefers to keep its prices under control as it is an important raw material for many industries.

Prime Minister Manmohan Singh’s explanation that his government had wanted to go the auction route, but that the concerned state chief ministers did not want it, does not hold much water. Sure, the chief ministers concerned may have preferred discretionary allocation as against auctioning of the mines on grounds that it would drive up the price of power. But it is hard to believe that the UPA government at the Center would have succumbed to pressure from state governments, especially since these particular states happen to have BJP-led governments!

Srirekha Chakravarty


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