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A special court on Tuesday came down heavily on the United Progressive Alliance (UPA) regime questioning the role of the government machinery in allegedly protecting the interest of business houses, including the Birlas. "It is found that a concerted effort was being made to manipulate the entire government machinery so as to protect the interest of Hindalco,” special judge Bharat Parashar had observed on Tuesday while dismissing Central Bureau of Investigation's closure report in the Hindalco coal block case.
Before coming to a conclusion, the court chalked out the turn of events that the Central Bureau of Investigation (CBI) sleuths observed while the controversial Talabira II coal block in Odisha was jointly granted to Hindalco,Neyveli Lignite and Mahanadi Coalfields. Business Standard takes a look at the observation of the court and list out the things that unfolded in the then Prime Minister Manmohan Singh’s office when the coal block allocation was made back in 2005.
Birla’s long wait
Indian Aluminium Co Ltd (Indalco) -- a Aditya Birla group company-- was insisting for allocation of Talabira II coal mine for long but Coal India Limited (CIL) expressed its desire to not allocate this coal block to private parties and recommended allocation to Neyveli Lignite Corporation Ltd (NLC) for its 2000 MW power plant.
A sub-committee was formed in the 21st meeting of the coal ministry’s screening committee (19 August 2003) to look into the allocation of the coal block which favoured allocation to NLC for captive sue by themselves or Mahanadi Coal Limited
The sub-committee report was submitted to then coal secretary and chairman, screen committee P C Parakh in November 2003
25th Screening Committee meeting
Application of six companies which applied for allocation of Talabira II coal block in Odisha considered in the 25th Screening Committee meeting of the union coal ministry including Indalco and Hindalco (Aditya Birla group companies) and Neyveli Lignite Corporation Ltd
The 25th meeting of the screening committee (held in January 2005) concluded that NLC was the most deserving company for Talabira-II coal block
Hindalco were told that they had been already allotted Talabira I for 140 MW Central Power Plant (CPP) at Hirakud and 50 MW CPP at Raigarha a few years back but the two CPPs are yet to be set up and commissioned. Odisha government had supported the allocation of Talabira II to Hindalco in the meeting
The location of NLC’s power project was found adjacent to Talabira II and the committee said that it needs to be given top most priority as it will give cheaper power to the power grid and various states. Odisha government very strongly supported allocation to NLC
However, Odisha government said while they support NLC’s project, Hindalco will give maximum value and lead to greater employment generation. It suggested the block be given to Hindalco.
However, Parakh observed: “energy intensive processes should be taken up where the power tariffs are lower and energy intensive projects should not be encouraged in places like India where power tariffs are high. Energy intensive part of the aluminium project could be outsourced and only the less energy intensive parts of the process should be taken up in India”
The Committee decided not to give separate coal block to Hindalco and Talbaria II and III could be developed as a single large mine allocated to NLC in conjunction with MCL. Further, after meeting the full requirement in the proposed 2000 MW power plant, Hindalco could be supplied the required quantity of coal from this mine
The committee also proposed amendments in the existing guidelines to allow deserving private firms to form JVs for carrying out coal mining in the allocated block. The company with highest stake can be designated as ‘Leader Company’ and allocated captive block and a group of other companies can be nominated as associated companies for supply of coal by the leader company
Confirmation from minutes of the meeting
The minutes of the 25th meeting were confirmed in the 27th meeting held in March 2005. The minister of State for Coal Dasari Narayan Rao forwarded Parakh’s recommendation to then Prime MinisterManmohan Singh also holding charge of Minister of Coal in April 2005 along with the minutes of 25th meeting in which Hindalco was not recommended the coal block.
PM Singh approved them in June 2005 thereby no change was either effected or suggested in the minutes of the 25th screening committee. The amended guidelines were applicable from the 25th meeting
In June 2005, Parakh made the following observation, “we must now start issuing orders of allocation and complete this work by July 2005 in respect of all the screening committee meetings held so far”
Letters
In the meantime, Aditya Birla Group chairman Kumar Mangalam Birla submitted letter dated 7 May 2005 to the PM requesting allocation of Talabira II coal block. PM made a note on the letter seeking report from coal ministry
PM sends letter to Parakh on 25 May 2005. No report received from ministry, a reminder was then sent by the Prime Minister’s Office to Parakh on 16 June 2005.
Birla submitted another letter on 17 June 2005 identical to the previous letter. BVR Subramanyam, Private Secretary to the PM made the following note on the second letter. “the Prime Minister desires that this matter be perused on priority so that a decision is arrived at on this long pending matter at the earliest so that the employment and revenue potential of the project is fully achieved”
Birla’s second letter was also forwarded to Parakh on 24 June 2005. Secretary was asked to submit a report by 28 June 2005
First barrier
Premraj Kuar, then section officer in MOC made observation expressing difficulty in acceding to the request of Hindalco for allocation of Talabira II coal block. He put up a draft Office Memorandum for approval. However, this was not approved by Parakh
In the meantime, Parakh held meetings with then Coal joint secretary K S Kropha and then Director, Coal Sujit Gulati. Gulati made a note stating that the Talabira coal block has taken “a new hue” and indicated that a revised proposal will be sent to the PMO.
Reminders
Various reminders were issued to the coal ministry by the PMO on 16 June 2005, 24 June 2005, 29 June 2005 and 6 July 2005 in reponse to Birla’s letters
Javed Usmani, JS, PMO and K V Pratap, Deputy Secretary, PMO pursued the matter with the coal ministry telephonically 6 times asking the Ministry to expedite the reply
P C Parakh prepared a note on 11 August 2005 based on his meeting with Birla in July 2005 as well and submitted two new options of allocating the coal block accommodating Hindalco
This note was put up to Darasri Narayan Rao, MoS Coal and a copy of the note was directly received in PMO
Word of caution
K V Pratap, Deputy Secretary, PMO on 12 August 2005 noted that coal block be allocated to only NLC and not Hindalco listing out the reasons. On the same day, Javed Usmani in his note said that it will be appropriate for PM to dispose off the issue after considering views of the MoS Coal
Rao made a note dated 16 August 2005 though cautioned that the decisions taken in the past are in public domain, proposed consideration of supply of coal to Hindalco from Talabira II at transfer price. He also mentioned in the note about his discussion with Birla on the matter.
Odisha government’s strong support
Meanwhile, a letter dated 17 August 2005 was received in the PMO from Odisha chief minister Naveen Patnaik which said, "I strongly urge you to have the matter examined expeditiously so that this vitally important project is provided with the required coal linkage at an early date"
The first move
On 8 September 2005, Parakh held meeting with coal Joint Secretary K S Kropha and a note was put up by Sujit Gulati, Director, coal ministry the next day that the matter pertaining to Talabira II and Talabira III were discussed and it was decided that both be mined after a joint venture company is formed between Mahanadi Coal Limited on one side and NLC and Hindalco on the other. The equity shareholding pattern suggested was 70 per cent, 15 per cent and 15 per cent respectively. The note also mentioned that the satisfaction level of NCL would be 29 per cent and Hindalco would be 81.5 per cent. Kropha who endorsed the note mentioned that coal from the barrier between the two blocks be given to NLC and Hindalco to maintain parity in the satisfaction level.
On 12 September 2005, Parakh observed that the arrangement proposed by Gulati is reasonable and with this scheme, 80 per cent of Hindalco's requirement will be met. Further, he mentioned that the full requirement of NLC will be met from the coal reserves of MCL for Talabira III once a JV is formed.
Dasari Narayan Rao signed it and sent the recommendation to the PMO on 16 September 2005
Prime Minister’s Office
In the PMO, K V Pratap then Deputy Secretary in the PMO noted on 22 September that the equity share holding arrangement proposed do not meet the guidelines for allocation of captive coal blocks approved by the PM on 9 June 2005. According to the norms, the companies applying for JV will have equity share according to their requirement of coal and the coal distribution will be in proportion to their respective assessed requirements. He, thus, stated that the equity holding of NLC and Hindalco should be 22.5 per cent and 7.5 per cent respectively, not 15 per cent each.
Javed Usmani, then joint secretary in the PMO suggested acceptance of the new proposal by the coal ministry but also observed that forming a JV in the proposed set up will require relaxation in the guidelines approved by the PM. In his note, he also said, "However, as the standing committee in its meeting held on 10 January 2005 had recommended that Talabira II be allocated to NLC, a PSU, it would not be appropriate to preclude NLC from consideration altogether, particularly because this recommendation and its approval by PM is in public domain."
The approval
T K A Nair, then Principal Secretary to the PM, approved the recommendation of the coal ministry on 27 September and 1 October 2005. K V Pratap communicated approval of the PM to the aforesaid note of the coal ministry on 4 October 2005.
Allotment letter was issued by the coal ministry on 10 November 2005 on condition that JV be formed with the Cabinet approval
Post approval hurdles
S Jayaraman, CMD of NLC sent letters to Parakh informing that 15 per cent coal from these blocks wouldnt suffice their needs for proposed 2000MW power plant in Odisha. Pursuant to this, coal ministry allotted another coal linkage to NLC for its power project on 28 July 2006.
However, Jayaraman again wrote a letter this time to the additional secretary, coal on 19 August 2006 requesting grant of additional allocation of coal linkage to NLC.
On 26 June 2006, a meeting with agenda "Nature of disputes standing in the way of an agreement" was held under the chairmanship of K S Kropha, JS, coal ministry. The meeting was however only attended by representatives of Hindalco and Mahanadi Coal and NCL chose not to attend.
The minutes of the meeting noted that a lot of time is being taken to sign an agreement even after the allotment. It further stated, "Talabira II is the focus of the public as it has been given to Hindalco or else it will be controversial". In the meantime, K S Kropha, joint secretary at coal ministry wrote to Hindalco in a note saying, "It should be appreciated that the government had gone out of the way to accomodate Hindalco in Talabira II...Considering the special circumstances under which Hindalco was made a partner in the JV, the company should take the lead in ironing differences and conclude the JV.
Subsequently, on 16 July 2008 a JV named MNH Shakti Limited was formed between the three firms -- Hindalco, Mahanadi Coalfields and NLC.
