Govt admits to irregularity in coal block allocations

Allotments were made in good faith but could have been done in a better manner, Attorney-General tells Supreme Court

A day after the Supreme Court’s observation that large investments made by companies could not be a defence against cancellation of coal block allocations, the government appeared to be accepting, albeit partially, that there could have been irregularities in the allotment process.

Attorney-General G E Vahanvati on Thursday said the allocations had been done in good faith due to the acute need for power after economic liberalisation. But, in hindsight, something went wrong and the processes could have been followed in a better manner.

He was fielding a barrage of questions from a three-judge Bench headed by R M Lodha over the alleged arbitrariness in coal block allocations over a decade. He told the Bench he would get instructions from the government by next week about cancellation of 42 blocks allocated after 2005; he would on Wednesday inform the court about the decision.

On the court’s remark that the allocations could have been done in a better manner, Vahanvati agreed those “could have been done in a more refined and better way. I accept my lordships’ view”.

The government had taken the stand that the letters of intent (LoIs) issued over the years did not confer any right to the companies over the coal beneath the ground. Vahanvati said the LoIs did not confer any right to the companies, and there was no “largesse” as alleged in the petition moved by Common Cause, a non-profit organisation. The companies had not obtained legal rights and they could not assert those through a court of law.

TWISTS IN A DARK TALE

• Jun 1993: The Coal Mines Amendment Act passed to allow captive coal mining
• 1993 to 2009: Govt allocates 210 coal blocks to private and PSUs for captive consumption
• Jun 1, 2012: CBI registers preliminary inquiry for coal block allocation between 2006 and 2009
• Aug 17, 2012: CAG says govt extended undue gains to firms by not auctioning 57 blocks allocated between 2006 & 2011
• Aug 27, 2012: PM tells Parliament CAG’s assessment of Rs 1.86-lakh-crore loss to the exchequer through allocation of blocks was not justified
• Sep 2012: CBI begins grilling in the alleged coal scam after CVC forwards complaints; raids conducted and FIRs filed
• Jun 2013: FIR filed against JSPL Chairman Naveen Jindal; former MoS for coal Dasari Narayan Rao named accused
• Sep 2013: CBI registers PEs into missing coal files for allocations from 1993 to 2009
• Oct 15, 2013: CBI registers FIR against industrialist K M Birla and ex-coal secretary P C Parakh

The judges asked the counsel what was the difficulty then in cancelling the allotments. Nothing final had happened, they pointed out. So, there was enough opportunity to take corrective course. They observed that despite the Coal Mines (Nationalisation) and Mineral Development Acts, no rules or guidelines had been issued for decades, creating the imbroglio.

The attorney-general did not respond on the time given to the government to take a decision on deallocation, but he agreed that allocation of blocks was only the first step and there were several other stages to be crossed by the allottees. Many of them had not crossed those milestones.

The seven coal-rich states have passed the buck on to the Centre for bungling the allocations, maintaining they were only subordinates and participants in the decision primarily taken by the Union government.

Meanwhile, the Bharatiya Janata Party (BJP), the main Opposition party, stepped up pressure on the government and demanded the prime minister's resignation. “The attorney-general has accepted that something major was wrong in the coal block allocations. He has confided in the Supreme Court that there were serious irregularities in the allotments... The onus is now on the prime minister, as he held the coal portfolio from 2006 to 2009, when the allocations were made. We reiterate that he should take responsibility and resign,” BJP spokesperson Prakash Javadekar said.

In this petition, seeking cancellation of coal allocations since 1993, the court is threatening to repeat the 2G judgment, in which it had ordered cancellation of 122 licences and created a furore in the telecom sector. This time, the court seems to be nudging the government itself to take the harsh step, so that it cannot be embroiled in another volley of criticism for stepping into policy matters.

So far, the Central Bureau of Investigation (CBI) has registered 16 cases under three preliminary inquiries, including against industrialist Kumar Mangalam Birla and Congress legislator Naveen Jindal. Some more cases are expected to be filed shortly. The agency is looking into allocations made between 2006 and 2009 and those between 1993 and 2004, besides projects given under the government’s dispensation scheme. CBI is likely to close its probe in some of the coal blocks soon.

Based on a reference from the Central Vigilance Commission (CVC), CBI was asked to look into three areas — first, why were allocations continued during the periods under question despite legislative change to bring about auctioning being pending; second, whether these blocks were allocated in a fair and transparent manner; and third, if there had been any misuse of the coal blocks allotted to companies.

Both the coal ministry and the Prime Minister’s Office have clarified in the past, through separate statements, that the allocation process had to be continued in the larger interest of economic development of the nation, as demand for coal in critical infrastructure sectors of power and steel had risen dramatically.

The name of Prime Minister Manmohan Singh figured in the coal scam probe, as he was the competent authority to take the final decision on the allocation of a coal block to Hindalco — Singh held the additional charge of the coal ministry at that time. The prime minister had later criticised CBI for alleging criminal misconduct in decisions taken with no ill intention and within the prevailing policy. Singh had said such an approach was “flawed and excessive”. Since policy-making was a complex and multil-ayered process, “it would not be appropriate for a police agency to sit in judgement over policy formulation, without any evidence of malafide”, he had said.