A strange technical flaw in the allocation letters issued to captive coal block miners prevented the government from deducting bank guarantees in the cases concerning companies failing to meet the deadlines for commencing production.
A little more than 200 blocks have been allotted by the government so far, but production has begun in only 30 of these. Yesterday, a high-level inter-ministerial group finalised the norms for deducting bank guarantees in such cases.
However, the fact that the move comes two decades after the first block was allotted in 1993 and seven years after the system of bank guarantee was introduced has led opposition parties to allege foul play in allocation.
Asked why the government had not forfeited the bank guarantee in even a single case of delay in development of captive blocks, a senior official told Business Standard, “There is a technical flaw in the format of the allocation letters. As per the letters, the government can invoke the bank guarantee clause only in cases of less production, and not nil production.”(CASE DIARY)
All the cases where captive blocks have not been developed are cases of nil production. The official said the flaw came to light when some of the companies approached courts against the government’s decision to cancel allocations. The flaw occurred by chance, and the ministry is taking steps to correct it, the official added.
The Bharatiya Janata Party (BJP) accused the government of not forfeiting the bank guarantee of companies holding 157 coal blocks where production has not started so far. “The coal ministry informed it has not formulated a policy on the matter when I asked it why the guarantee was not encashed,” BJP Member of Parliament, Hansraj Ahir, told Business Standard recently.
It was on a complaint by Ahir and BJP spokesperson Prakash Javdekar that the Central Vigilance Commission ordered the Central Bureau of Investigation (CBI) to conduct a probe in the allocation of 65 blocks to companies between 2006 and 2009. The preliminary inquiry by CBI to ascertain whether some companies sold their blocks started in June. CBI today filed five separate cases against five companies and certain government officials for alleged misrepresentation and false claims.
The system of a bank guarantee was first introduced in 2005 for private companies, and in 2007 for central or state utilities. Under the norms, a company awarded a block is required to give a bank guarantee equal to a year’s royalty amount, based on mine capacity, as assessed by the Central Mine Planning and Design Institute, within three months of the issue of allotment letter. Upon approval of the mining plan, the guarantee amount is modified, based on the final peak rated capacities of the mine. Half the amount is linked with the achievement of milestones before production begins and the other half to guaranteed production.
Coal Minister Sriprakash Jaiswal accused BJP of having a design in demanding en masse cancellation of coal blocks to actually benefit the private companies and further its political gains at the same time. Asked about the allocation policy, he said "it was a hundred per cent correct policy. There could not be a better policy than this".
The Comptroller and Auditor General of India’s report, tabled in Parliament last month, had pulled up the government for not having finalised the norms which led to the lapse of guarantees that could have been forfeited. The report had pegged the lapsed amounts at Rs 311.8 crore against 15 blocks.
