If Bollywood like Hollywood made political biopics, and if things hadn’t turned out the way they have, the story of the former Prime Minister Manmohan Singh would have made for a reasonably good movie. Here was a man who rose through the ranks and got a doctorate in economics from the Oxford University. He became the Chief Economic Adviser in the seventies, governor of the Reserve Bank of India and the Deputy Chairman of the Planning Commission in the eighties, the finance minister of India in nineties and finally the Prime Minister of India in the noughties. It was the classic story of an underdog who was sometimes “very lucky,” making it in life. This is a format that biopics thrive on. Nevertheless, in the autumn of his career, things aren’t going quite right for Singh. A happy ending is no longer on its way. His tenure as Prime Minister saw him overseeing probably the most corrupt and inefficient government that India has ever seen. And now Singh, despite being not corrupt is paying for the same. A few days back, special CBI judge Bharat Parashar, summoned Singh as accused in what is now known as the Coalgate scam. Parashar has summoned Singh for re-allocating a coal mine to Hindalco. As the judge said in his order: “There was a conscious effort on his part to somehow accommodate M/s Hindalco in Talabira-II coal block.” The screening committee had earlier allocated the block to the government owned Neyveli Lignite Corporation. Singh could have easily saved himself from this embarrassment, if he had acted in a way he thought was the correct way to go about things. But before we get into that, a few other things need to be discussed. On June 9, 1993, the the Coal Mines(Nationalisation) Act was amended to allow companies which were in the business of producing power and iron and steel, to own coal mines for their captive use. This was done primarily because the government owned Coal India could not produce enough coal to meet demand. Between 1993 and 2011, more than 200 hundred coal-blocks were given away free by various governments. Most of these blocks were allocated between 2004 and 2011 when the Congress led United Progressive Alliance was in power. A straight forward explanation for this lies in the fact that this was the period when coal prices had started to rally and hence, a free coal block had great value. Interestingly, Singh was coal minister for a significant period between 2004 and 2011. The blocks were allocated by an inter-ministry screening committee which had the coal secretary as its Chairman. The committee was supposed to allot blocks after assessing applications by using parameters like techo-economic feasibility of the end-use project, the past record of the applicant in executing projects, the financial and technical capability and so on. The trouble is that the process followed by the committee was not clear from its records. The former Comptroller and Auditor General Vinod Rai makes this point in his book Not Just An Accountant: “All that the records showed was that the committee met, deliberated and merely recorded the name of the block allotted to a company, and the state where the end-use plant existed. It is left to the reader to decide if transparency was a victim.” Interestingly, from 2004 onwards the number of applicants for coal-blocks just went through the roof and it was not possible for the screening committee to be objective about the coal-block allocation. This is something that former coal secretary P C Parakh recounts in Crusader or Conspirator—Coalgate and Other Truths: “108 applications were received for Rampia and Dip Side of Rampia Block [names of two coal-blocks]. I found it difficult to make an objective selection when the number of applicants was in single digits. How could the Screening Committee take objective decisions when the number of applicants per block had run into three digits?” In August 2004, Parakh proposed to Manmohan Singh(who had taken over as coal minister after Shibu Soren resigned) that the coal-blocks should be allocated through a process of competitive bidding. This would ensure transparency in allocation. It would keep also keep away non-serious players and help the government earn some revenue. On August 20, 2004, Singh approved allocation of coal-blocks through the competitive bidding route. Immediately, letters written by various MPs opposing competitive bidding started to come in. As Parakh recounts in his book: “This included one from Mr Naveen Jindal who had considerable interest in coal mining.” What did not help was that Shibu Soren, who was a former coal minister by then, and would become coal minister again, opposed it. Dasari Narayana Rao, who was minister of state for coal, was also not in favour of the decision. Politicians not wanting an auction was understandable because it would take away the influence that they had in allocating coal-blocks. Singh gave into the pressure and on July 25, 2005, it was decided that the coal ministry would continue to allot coal-blocks through the screening committee route. In a decision on September 24, 2014, the Supreme Court cancelled 204 out of the 218 coal-blocks allocated by the government since 1993. In fact in August 2014, the Court had stated that: “the entire exercise of allocation through Screening Committee route thus appears to suffer from the vice of arbitrariness and not following any objective criteria in determining as to who is to be selected or who is not to be selected.” Singh could have saved himself a lot of embarrassment if he had insisted on the competitive bidding route, which he had agreed to in August 2004. But he looked the other way, choosing to give in to the compulsions of coalitions politics and the fact that if he did things his way, he would not last as the Prime Minister. That’s the thing about being in power. Once you have it, it is better to look the other way than stand up for what you believe in and risk the chance of being fired and leading a retired life of loneliness. Singh may not have been personally corrupt, but he was dishonest to himself. He ultimately did not stand up for things that he believed in, in order to ensure that he continued to be the prime minister. And that is indeed very tragic.
(Vivek Kaul is the author of the Easy Money trilogy. He can be reached at [email protected])
The coal sector in India is in a mess. Yesterday, the government started the process to set it right. It plans to promulgate an ordinance to start with. This ordinance will give the government the power to e-auction coal blocks. The Supreme Court in a decision given in September 2014 had cancelled the allocation of 204 out of the 218 blocks that various governments since 1993 had allocated to companies for captive consumption. The blocks had been allocated to several companies so that they could use the coal produced in the production of cement, power, aluminium, steel etc. The Supreme Court deemed the process of allocation to be suffering from the “vice of arbitrariness” and cancelled these blocks. These blocks will now be auctioned. As finance minister Arun Jaitley said yesterday ““As far as the private sector is concerned, the actual users of coal in the cement, steel and power sectors who apply for a certain number of coal mines will be put in the pool and there would be an e-auction. A sufficient and adequate number of mines would be put so that actual users go back with the mines.” This is a good step given that it makes the entire process transparent instead of the arbitrary manner in which coal blocks were allocated through the earlier screening committee method. Further, the system of allocation of coal blocks for free through the screening committee method was discriminatory. It offered a huge premium to companies which managed to get a free coal block, in comparison to ones that did not. Nevertheless it is important that auctions are designed properly. Earlier this year the government tried to auction a few coal blocks and found no takers. Take the case of the Jhirki west coal block. The auction for this block had a fixed price of Rs 177 crore. Over and above this a minimum price of Rs 2,902 per tonne needed to be paid. Then there was the cost of excavating coal and getting the block up and running. Once these factors were taken into count the total cost worked out at Rs 8,000 per tonne. The block had low quality coking coal. And at this price good quality coking coal could be imported from Australia. Given this, it is not surprising that the government found no takers for the block. Hence, it is important that the auctions be designed properly. Further, 42 out of the 218 coal blocks whose allocation has been cancelled are already operational. The ordinance will allow the transfer of land from companies which own these cancelled mines to the companies which emerge as the winning bidder in the e-auction. A committee will decide on the price of land. Interestingly, a PTI report points that “Sources said successful bidders in the fresh auction of coal blocks along with the land and plant standing on it would be liable to pay the earlier allottees the cost of the land and the plant along with 12 per cent annual interest on the amount that was originally invested for purchasing the land and setting up plant.” This process needs to be handled with care. Many of the companies which were allotted coal blocks are basically crony capitalists and may try to come up with trumped up estimates of the cost of land and plant. Also, in case of mines that are operational, a certain amount of coal has already been mined. This will have to be taken into account so that the prospective bidders in the auction know the amount of coal they can hope to mine, and can accordingly come up with a bid price. In fact, the companies which were allocated coal blocks had to use the coal produced for captive consumption only. Hence, if a coal block had been allocated to a power plant, the coal produced needed to be passed on to the power plant. Any excess coal had to be handed over to the local subsidiary of the government owned Coal India Ltd. Nonetheless there have been a spate of media reports suggesting that the excess coal that was produced was being sold in the open market. As a report in The Economic Times points out “What happened to the surplus coal extracted? In some cases, illegally mined coal has found its way to places like the coal mandi near Varanasi.” This factor will also have to be taken into account before the auction. And it is here that the things can get a little tricky because some companies have mined more coal than they have actually reported. The government plans to hand over the money generated through the auctions to the state in which the block is located. This is an excellent move, given that the permissions at the state level take a lot of time for a coal mine to get operational. With states being made a part of the process, they have some incentive in not creating hurdles in the production of coal, as has been the case in the past. Interestingly, Jaitley also said that coal mining will be opened up for the private sector. Currently only Coal India Ltd is allowed to do excavate and sell coal to end users. As Jaitley put it “There will be an enabling provision for the future where under rules which are framed for commercial users of mines could also be decided by the Central government. This would lead to an optimal utilisation of the natural resource.” This will call for the amendment of the Coal Mines (Nationalization) Act of 1973. India currently has a total of 301.6 billion tonnes of coal reserves. Despite having the fifth largest coal reserves in the world, India is the third largest importer of coal having imported around 104.7 million tonnes in 2013-2014. These imports cost around $20 billion a year, as per Jaitley. Given this, it is a no-brainer to suggest that India needs to produce more coal. During the year 2010-2011, Coal India produced around 431.26 million tonnes of coal. In 2013-2014, it produced 462.42 million tonnes. Hence, the production of coal has increased at the rate of a minuscule 1.76% per year. Coal India produces a bulk of India’s coal. And it is obvious that it has been unable to increase its rate of production over the years. Given this, more companies need to be allowed to excavate coal. Taking that into account, the decision of the government to open coal mining to the private sector is a good one. As former coal secretary PC Parakh writes in his book Crusader or Conspirator—Coalgate and Other Truths : “Had we opened up coal mining to private sector for commercial mining, along with power sector, in the early 1990s, we would by now have at least half a dozen large coal mining companies in the private sector. This is what happened in the telecom sector. The country would not be facing huge shortage of coal and large outgo of foreign exchange on import of coal.” Also, production of coal for captive use is not the most optimum way to go about the whole thing. As Partha Bhattacharya, former chairman of Coal India, wrote in a column in The Indian Express “Captive end-users mining coal is not optimal. Nor is it known to have succeeded elsewhere in the world. Coal-mining has its own challenges and needs core competence, which the end-users are unlikely to possess.” Given this, allowing private companies into commercial coal mining is required. The first thing opening up of the sector will do is to create some competition for Coal India and hopefully improve its productivity. As Swaminathan Aiyar pointed out in a recent column in The Economic Times “In Australia, collieries produce 75 tones per manshift (of eight hours) in open-cast mines and 40 tonnes per manshift in underground mines. Coal India averages barely 7 tonnes and 0.8 tonnes respectively…Coal India’s machines work 15 hours per day , against 22 hours per day in efficient mines.” Nevertheless, there are a few issues that need to be highlighted here. First and foremost no date has been set for allowing private commercial mining of coal. As Parakh told The Times of India “I won’t say it is a big ticket reform…There is no timeline. This was an opportunity to come clean on the coal sector and allow commercial mining.” And that hasn’t happened. Further, no foreign companies will be allowed to carry out commercial mining of coal. This is where things get tricky. The expertise in India to set up and run a coal mine is limited to Coal India. If only Indian companies are allowed to commercially mine coal, they will end up poaching people from Coal India to run their mines. Hence, is important that we allow international companies to enter this sector. If this happens, these companies can bring in their technology and in the process hopefully improve India’s low coal productivity. Also, this is likely to keep the crony capitalism in India under some control. As Raghuram Rajan and Luigi Zingales write in Saving Capitalism from the Capitalists “The most effective way to reduce the power of incumbents to affect legislation is to keep domestic markets open to international competition…Openness creates competitions from outsiders—outsiders that incumbents cannot control through political means.” To conclude, the government has done well to address the issues plaguing the coal sector in India. Nevertheless, given the mess that the coal sector is in, a lot more needed to be done.
In an interview to NDTV, Naveen Jindal , chairman of Jindal Steel and Power, and Congress politician said that his company would not be able to pay the fine imposed by the Supreme Court. “We will not be able to pay it..because we have not made a provision for it,” Jindal said. Jindal also told the television channel that the Supreme Court decision “was a ‘setback’ for companies which have mined coal for the past 20 years to generate power and make steel, and now been told that what they are doing is illegal, while they have been creating wealth for the country.” In a decision on September 24, 2014, the Supreme Court had cancelled 204 out of the 218 coal blocks allocated by the government since 1993. The coal blocks were allocated for free for captive mining. Companies which were given these blocks could use the coal to produce power, iron and steel, aluminium, cement etc. The Court has also fined companies at the rate of Rs 295 per tonne for all the coal that they have produced till date and will continue producing till March 31, 2015, when they need to hand over their mines to the government. Jindal was the biggest beneficiary of the captive coal block allotments, having been given nine blocks in all. Given this, things he has said in the NDTV interview need to be looked at closely. The first thing Jindal talks about are “companies which have mined coal for twenty years.” No company has been mining coal for twenty years. Provisional coal statistics released by the Coal Controller Organisation, which is a part of the coal ministry, shows that coal was first mined by the captive coal blocks only in 1997-98. Also, during this year a minuscule amount of 0.71 million tonnes of coal was produced by these mines. The production crossed 10 million tonnes of coal only in 2004-2005, when these blocks produced 10.11 million tonnes. Hence, serious production from these coal mines has happened only for 10 years and not 20 years as Jindal points out. This was primarily because between 1993 and 2002 only 15 blocks had been allocated to private companies. This maybe nitpicking, nonetheless it is an important factual point to make given the sensitivity of the issue. In Jindal Steel and Power’s case the Gare Palma IV coal block has been operational from February 1999. This coal mine produced 6 million tonnes of coal in 2013-2014 and is expected to produce a similar amount in 2014-2015. Further, just because something has been happening for many years, doesn’t mean it is right, even though it may have been government policy. The coal blocks were allocated based on the recommendations of an inter ministerial screening committee. The committee was set up in July 1992 and the coal secretary was its chairman. As Vinod Rai writes in Not Just an Accountant—The Diary of the Nation’s Conscience Keeper “This committee was to scrutinize applications for captive mining and allocate coal blocks for development, subject to statutes governing coal mining, following which the coal minister would approve the allotment…The screening committee is expected to asses applications based on parameters such as the techno-economic feasibility of the end-use project, status of preparedness to set up the end-use project, past track record in executing projects, financial and technical capabilities of applicant companies and the recommendations of the concerned state governments and ministries.” The committee was supposed to look at each application based on these criteria and then make a decision of who to allot the coal block to. But that doesn’t seem to have happened. As the Supreme Court judgement dated August 25, 2014, clearly points out “The entire exercise of allocation through Screening Committee route thus appears to suffer from the vice of arbitrariness and not following any objective criteria in determining as to who is to be selected or who is not to be selected.” The judgement further points out that “there is no evaluation of merit and no inter se comparison of the applicants. No chart of evaluation was prepared. The determination of the Screening Committee is apparently subjective as the minutes of the Screening Committee meetings do not show that selection was made after proper assessment. The project preparedness, track record etc., of the applicant company were not objectively kept in view.” Further, the guidelines that the Screening Committee was supposed to follow did not contain “any objective criterion for determining the merits of the applicants.” “As a matter of fact, no consistent or uniform norms were applied by the Screening Committee to ensure that there was no unfair distribution of coal in the hands of the applicants.” The Supreme Court came to this conclusion after studying the minutes of the Screening Committee meetings. Interestingly, the Comptroller and Auditor General(CAG) had come to a similar conclusion when it had audited the procedure for allotment of coal locks in mid 2011. As Rai points out “The process that the committee actually followed was not really clear from the records. All that the records showed was that the committee met, deliberated and merely recorded the name of the block allotted to a company, and the state where the end-use plant existed. It is left to the reader to decide if transparency was a victim and, if so, how audit erred in pointing out this lacuna.” The problem was that even if the Screening Committee wanted to follow objective criteria, at times it was simply not possible. Former coal secretary P C Parakh (who took over as coal secretary in the second week of March 2004) explains this in Crusader or Conspirator—Coalgate and Other Truths “By the time I took charge of the ministry, the number of applicants for each block had increased considerably although still in single digits. I found a number of applicants fulfilling the criteria specified for allocation of each block on offer. This made objective selection extremely difficult.” In fact in the years to come the situation became much worse as more and more companies applied for coal blocks. As Parakh writes “According to CAG’s report, 108 applications were received for Rampia and Dip Side of Rampia Block [names of two coal blocks]. I found it difficult to make an objective selection when the number of applicants was in single digits. How could the Screening Committee take objective decisions when the number of applicants per block had run into three digits?” Parakh to his credit realized pretty early that the Screening Committee method of allotment wasn’t working. In fact, in his book Parakh goes on to list several reasons on why giving away coal blocks free for captive mining by companies just did not make sense. By giving away coal blocks for free, companies which had no experience in coal mining were getting into a totally unrelated field. The government had no way of monitoring whether the captive mine was being used for captive use. Or was the company, which had got the coal block, selling the coal it was producing in the open market and thus “promoting corruption and black money”. Further, the system of allocation of coal blocks for free was discriminatory. It offered a huge premium to companies which managed to get a free coal block, in comparison to ones that did not. Hence, Parakh proposed to Manmohan Singh(who had taken over as coal minister) in August 2004 that coal blocks should be allotted through the competitive bidding route. Before he did this Parakh had even called an open discussion of all the stakeholders in June 2004. The stakeholders included the business lobbies FICCI, CII and Assocham, other ministries whose companies had applied for coal blocks and private companies. Parakh points out that most invitees were not in favour of competitive bidding of coal blocks. As he puts it “not many participants were enthusiastic about open bidding. Their main argument was that the cost of coal to be mined would go up if coal blocks were auctioned.” Parakh suggests that assuming that business men bidding for coal blocks (if such a process were to be introduced) would drive up the price of coal to astronomical levels is suggesting that they are stupid. As he writes “Participants at open auctions are hard-headed businessmen with an acute sense of profitability. They do not make irrationally high bids. The price at which coal from CIL[Coal India Ltd] was available would automatically put a cap on the bid amount.” The industry ultimately resisted open bidding simply because until then they had been getting coal blocks for free. And if something is available for free why pay for it. “To an extent, it was a reflection of corporate India’s aversion to transparency,” writes Parakh. Nevertheless on August 20, 2004, Manmohan Singh approved allocation of coal blocks through the competitive bidding route. Immediately after this a number of letters written by MPs opposing competitive bidding started coming in. As Parakh writes “This included one from Mr Naveen Jindal who had considerable interest in coal mining.” This is when Dasari Narayana Rao, the famous Telgu film director, who was the minister of state for coal. entered the scene. As Rai points out in his book “Rao, observed that any change in the procedure for the allocation of coal blocks would invite further delay in allocation.” As Rao wrote while submitting the file to Manmohan Singh: “It is difficult to agree with the view that Screening Committee cannot ensure transparent decision-making. This alone was not adequate ground for switching over to a new mechanism, particularly when the interests of core infrastructure areas are involved.” On March 25, 2005, Manmohan Singh “recorded the approval of the cabinet note seeking sanction of the competitive bidding system,” Rai points out. But Rao still did not give up and kept talking about the “cost implications” of the competitive bidding system of allocation of coal blocks. He finally succeeded and on July 25, 2005, it was decided that the coal ministry would continue to allot coal to blocks through the Screening Committee route. In May 2014 the enforcement directorate slapped money laundering charges against Rao and Jindal. As the PTI reported “The agency, according to sources, has framed the charges after it found multi-layered transactions between the firms owned by Jindal to Rao’s firms based in Hyderabad and “illegal money” was routed for alleged favours given for the allocation of coal firms to Jindal.” Interestingly Jindal told NDTV that “one of the Jindal companies had lent money to an unrelated company, which in turn invested in a company in which the Mr Rao had a controlling stake.” Given this, the situation is not as simplistic as Jindal tried to project in his NDTV interview. Also, between the Supreme Court and the CAG it has been clearly established that the Screening Committee route to allot coal blocks was not transparent at all and companies which got coal blocks benefited from this lack of transparency. Given this, it led to the Supreme Court cancelling 204 out of the 218 blocks that had been allocated, including coal mines which were already under operation. Jindal in his interview also told NDTV that his company won’t be able to pay the fine imposed by the Supreme Court because they hadn’t made a provision for it. The Supreme Court has fined the companies already operating coal blocks Rs 295 per tonne for all the coal that they have produced till now and all the coal they will continue to produce till March 31, 2015, when they need to hand over the mines back to the government. This in a way took care of what Parakh termed as discriminatory. As he writes “The [Screening Committee] system of allocation of captive [coal] blocks offers huge advantage to industries that get coal blocks over those who are not able to get coal blocks.” Edelweiss Securities estimates that Jindal Steel and Power will have to pay a fine of close to Rs 3000 crore. While the company may not have made a provision to pay the fine, it needs to be pointed out that as on March 31, 2014, the company had a balance sheet size of Rs 74,072.1 crore. Its reserves and surplus amounted to Rs 22,519 crore. It had cash and bank balances of Rs 1,015.28 crore. Further, in the last two financial years it has made a total profit of Rs 4820.5 crore. Also, let’s calculate the financial benefit arising out of the Gare Palma IV coal block which as pointed out earlier has been operational from February 1999. This coal mine produced 6 million tonnes of coal in 2013-2014 and is expected to produce a similar amount in 2014-2015. A research report brought out by Kotak Institutional Equities suggests that it costs Rs 600-800 per tonne to produce captive coal. In comparison, it costs Rs 3,500 per tonne to import coal. Hence, imported coal is four to five times more expensive than captive coal. So the cost of producing 12 million tonnes of coal over a two year period at the upper end cost of Rs 800 per tonne would have been Rs 960 crore. Along with a fine of Rs 295 per tonne this amounts to Rs 1314 crore. Consider the other possibility of importing coal at Rs 3500 per tonne. This would have cost the company Rs 4200 crore. The difference between these two numbers comes to Rs 2886 crore. This calculation just takes the last two years into account. Nevertheless the mine has been functioning for close to 15 years now. The total fine that the company needs to pay amounts to around Rs 3000 crore. Hence, even after it pays the fine the company would have managed to save a lot of money over the years because it got the coal block for free through a process which wasn’t transparent at all. In fact, Jindal isn’t the only one protesting. The pink papers over the last few days have been full of quotes criticizing the Supreme Court’s decision to cancel the coal block allocations. But when a process has not been transparent for 20 years, it needs to be cancelled. And when this happens, there are bound to be repercussions, which the incumbents won’t like. As the American author Upton Sinclair once wrote “It is difficult to get a man to understand something, when his salary depends upon his not understanding it!” The corporates and their lobbies who are coming out against the Supreme Court’s decision are a good example of this. It needs to be pointed out here that only 40 out of 218 coal blocks are currently operational. Companies, given that they had got blocks for free, seemed to be in no hurry to start production. That wouldn’t have been the case, had they paid for it in the first place. To conclude, it is worth quoting what Raghuram Rajan and Luigi Zingales write in Saving Capitalism from the Capitalists “Since a person may be powerful because of his past accomplishments or inheritance rather than his current abilities, the powerful have a reason to fear markets…Those in power – the incumbents – prefer to stay in power.” Jindal clearly would have liked that. The article originally appeared on www.FirstBiz.com on Sep 28, 2014
(Vivek Kaul is the author of the Easy Money trilogy. He tweets @kaul_vivek)
In it’s judgement yesterday, the Supreme Court came down heavily on the central government on how it went about giving away “coal blocks” free to private and public sector companies between 1993 and 2011. The central government during the period gave away 195 coal block with geological reserves amounting to 44.8 billion tonnes. The decision to give away “coal blocks” was taken through a screening committee. The Supreme Court in its judgement clearly says that “no objective criteria for evaluation of comparative merits” of companies to which these coal blocks were allocated, was followed by the Screening Committee. And hence it declared all the coal blocks that were given away for free as “illegal”. As the Supreme Court puts it in its judgement “The entire exercise of allocation through Screening Committee route…appears to suffer from the vice of arbitrariness and not following any objective criteria in determining as to who is to be selected or who is not to be selected. There is no evaluation of merit and no inter se comparison of the applicants. No chart of evaluation was prepared. The determination of the Screening Committee is apparently subjective as the minutes of the Screening Committee meetings do not show that selection was made after proper assessment. The project preparedness, track record etc., of the applicant company were not objectively kept in view.” These are basic steps that need to be followed in case of allocation of any project. The Supreme Court judgement goes on to point out several examples where the exercise of allotting coal blocks through the Screening Committee seems to be arbitrary. In fact, former coal secretary P C Parakh (who took over as coal secretary in the second week of March 2004) writes in Crusader or Conspirator—Coalgate and Other Truths that as the number of applicants for coal blocks kept growing beyond a point being objective about the allotment was simply not possible. As he writes “by the time I took charge of the ministry, the number of applicants for each block had increased considerably although still in single digits. I found a number of applicants fulfilling the criteria specified for allocation of each block on offer. This made objective selection extremely difficult.” He further writes “According to CAG’s report, 108 applications were received for Rampia and Dip Side of Rampia Block [names of two coal blocks]. I found it difficult to make an objective selection when the number of applicants was in single digits. How could the Screening Committee take objective decisions when the number of applicants per block had run into three digits?” Also, it is worth remembering here that all coal blocks were not the same. Coal could be mined at a cost of Rs 300 per tonne in a good open cost mine. On the other hand it could cost as high as Rs 2000 per tonne in an underground mine. The quality of coal would also vary. Hence there was an “enormous scope for favouritism and corruption” when allocating the block. In fact, Parakh goes on to list several reasons on why giving away coal blocks free for captive mining by companies just did not make sense. By giving away coal blocks for free, companies which had no experience in coal mining were getting into a totally unrelated field. The government had no way of monitoring whether the captive mine was being used for captive use. Or was the company, which had got the coal block, selling the coal it was producing in the open market and thus “promoting corruption and black money”. Further, the system of allocation of coal blocks for free was discriminatory. It offered a huge premium to companies which managed to get a free coal block, in comparison to ones that did not. Given these reasons, in August 2004, Parakh proposed to Manmohan Singh (who had taken over as coal minister after Shibu Soren resigned) that the allocation of coal blocks should be done through competitive bidding. In fact, even before Manmohan Singh had taken over as coal minister from Soren, Parekh had called for open house discussion of the stakeholders in June 2004. This included the business lobbies FICCI, CII and Assocham. Several other ministries whose companies had applied for coal blocks were invited. So were private companies. Parakh writes that most of the invitees were not in favour of competitive bidding for coal blocks. As he writes “not many participants were enthusiastic about open bidding. Their main argument was that the cost of coal to be mined would go up if coal blocks were auctioned.” This is an argument still made every time someone suggests that the government should auction natural resources and not give them away for free. Assuming that business men bidding for coal blocks (if such a process were to be introduced) would drive up the price of coal to astronomical levels is suggesting that they are stupid. As Parakh writes “Participants at open auctions are hard-headed businessmen with an acute sense of profitability. They do not make irrationally high bids. The price at which coal from CIL[Coal India Ltd] was available would automatically put a cap on the bid amount.” The industry ultimately resisted open bidding simply because until then they had been getting coal blocks for free. And if something is available for free why pay for it. “To an extent, it was a reflection of corporate India’s aversion to transparency,” writes Parakh. Nevertheless, Manmohan Singh approved allocation of coal blocks through competitive bidding on August 20, 2004. Immediately, the protests started. Letters started pouring in from MPs opposing the competitive bidding process. Among those who opposed the process was Naveen Jindal, “who had considerable interests in coal mining”. In a television interview Jindal argued that all over the world mining properties are given away for free. The government then earns money through royalty and taxes. Parakh explains why this is bunkum: “I am not aware of any country where fully explored mining properties are given free. What are being given away free are virgin areas with minimal geological information where large amounts of money has to be sunk as risk capital in carrying out exploration, which may or may not result in a commercially minable discovery.” Parakh writes that Dasari Narayana Rao, the Telgu film director, who was then the minister of state for coal, also tried his best to scuttle the move. He was helped in this by Shibu Soren, who was also coal minister for a brief period. Finally, after several ups and downs the proposal of open bidding for coal blocks did not see the light of day. Parakh concedes that there was no political will in pushing through a transparent process for allocation of coal blocks. Manmohan Singh had his hands tied to some extent due to the compromises that a coalition government has to make. But if he could push through the Indo-US nuclear deal despite the opposition and open up FDI in retail, he could have also pushed through the opening up of the coal sector, which he did not. Given that and the fact that he was the leader of the Congress led UPA government, when the most free coal blocks were given out, the ultimate responsibility for the current mess in the coal sector, lies with him. But the blame cannot completely lie with him, as we have seen earlier in this article. Also, the government told the Supreme Court during the course of proceedings that “the auction of coal blocks could not have been possible when the power generation and, consequently, coal mining sectors were first opened up to private participants as the private sector needed to be encouraged at that time to come forward and invest. Allocation of coal blocks through competitive bidding in such a scenario would have been impractical and unrealistic.” By the same logic telecom companies should have got the spectrum for free, which they did not, when mobile telephony was first introduced in the mid 1990s. As Parakh writes “Had we opened up coal mining to private sector for commercial mining, along with power sector, in the early 1990s, we would by now have at least half a dozen large coal mining companies in the private sector. This is what happened in the telecom sector.” What we have instead is a huge coal shortage. In 2014-2015, India’s coal demand is expected to rise to 787 million tonnes. The supply is around 200 million tonnes lower. And this is something that cannot be solved overnight.