A special court on Tuesday asked the Central Bureau of Investigation (CBI) to examine ex-Prime Minister Manmohan Singh in a case related to irregularity in allocating a coal block in which Aditya Birla Group Chairman Kumar Mangalam Birla and former coal secretary P C Parakh were named.
In October 2013, when the CBI had registered this case, it triggered a huge controversy as Singh’s role was also questioned by the opposition parties. Back then, Singh was quick to officially react to the allegations by issuing a press statement from the Prime Minister’s Office (PMO) within a few days of the registering of the case.
In his defence, Singh maintained that he is “satisfied that the final decision taken in this regard was entirely appropriate and is based on the merits of the case placed before him.”
The case relates to the allocation of Talabira-II and -III coal blocks jointly to Hindalco Industries (an Aditya Birla Group company) and with two other firms in Odisha’s Jharsuguda district in 2005. During this period, Singh was holding additional charge of the coal ministry.
Business Standard takes a look at Singh’s version of one of the most controversial coal block allocation.
Merit in the case
Chalking out the sequence of events, Singh said that the Talbaria coal block allocation was a case where “ the final decision differed from the earlier recommendation of the Screening Committee, and this was done following a representation received in the Prime Minister's Office from one of the parties, which was referred to the Ministry of Coal.”
Screening Committee’s first rejection
According to Singh, initially Birla (then non-executive chairman of Hindalco) had written to him (letter dated 7 May 2005) for allotment of Talabira II coal block in Odisha to Hindalco. Acknowledging the letter, Singh asked Birla to get a report from the coal ministry. Birla wrote another letter in June 2005 “repeating the request”, also writing to the coal ministry to send the report on the matter.
In August 2005, the Ministry of Coal had replied to the PMO saying that the Screening Committee, headed by Parakh, had recommended that the Talabira coal block be allocated to Neyveli Lignite Corporation (NLC) and not Hindalco as “adequate coal linkages had been provided to Hindalco from Mahanadi Coalfields Ltd. (MCL) a long time back and Hindalco had not used the coal.”
The committee had proposed that “NLC & Mahanadi Coalfields Ltd. can develop the two blocks together as one large mine through a Joint Venture (JV).”
However, Birla’s contention was that his company was the first one to apply for the block in 1996 and “the coal linkage granted earlier was not used as a bauxite mine lease relating to the aluminium plant had not materialized.” In fact, Birla further mentioned that “the Government of Odisha favoured allocation of Talabira-II to Hindalco in preference to NLC.”
Odisha government’s strong support
“While the file was being processed in PMO, the Prime Minister received a letter dated 17 August 2005 from the Chief Minister of Odisha (Naveen Patnaik) on the allotment of Talabira-II to Hindalco,” Singh said in the press statement.
In the letter, Patnaik had said that his government (also part of the standing committee deliberation) had given “topmost priority” to Hindalco and had “strongly supported the case.”
The reasons cited by the Patnaik government were that aluminium plants generate more jobs and create more wealth for the country compared to independent power plants. “The letter urged that these special considerations be kept in mind and the matter examined expeditiously,” the PMO said.
File returned
The PMO, on 29 August 2005, returned the coal ministry’s earlier recommendation of not allocating the coal block to Hindalco and asked the ministry to re-examine the matter in the light of Patnaik’s letter and resubmit the file.
In September 2005, the coal ministry re-submitted its recommendation and this time decided to allocate Talabira II & III as a single mine through a JV formed between Mahanadi Coalfields, NLC & Hindalco with equity shareholding of 70 per cent, 15 per cent and 15 per cent respectively. Accordingly, 70 per cent of the production was decided to be handed over to Mahanadi Coalfields and the rest equally to NLC and Hindalco.
“The satisfaction level of NLC would be 29 per cent of its total requirement and of Hindalco, 81.5 per cent,” the coal ministry had said.
The equity formula
The coal ministry stated the following as one of the reasons for the above recommendations, “NLC may not be dropped as it is a Central PSU already recommended by the Screening Committee. Hindalco’s case for allocation has been strongly recommended by the State Government and it has also been an early applicant.” The ministry re-instated that the Odisha government had clearly preferred Hindalco over others.
It further admitted that as a result of such an arrangement in allocating the coal block, “Hindalco’s satisfaction level is about 80 per cent, whereas NLC’s is much lower” adding further that the full needs of NLC could be met from Mahanadi Coalfields’ reserves in Talabira-III.
According to Singh, while processing the proposal, the PMO had noted that ownership pattern was not in correspondence with the guidelines approved by him in June 2005 which “required this ratio to be in proportion to the assessed requirement of coal of each allocatee. As per this guideline, the NLC:Hindalco ratio in their 30 per cent share should be 22.5:7.5 and not 15:15 as was proposed.”
However, the coal ministry said, “As for the NLC and HINDALCO equity ratio in the JV, it would require relaxation of guidelines that were approved by PM earlier, but this could be considered as NLC and Mahanadi Coalfields Ltd. are sister PSUs and NLC’s requirements of coal could be met from Mahanadi Coalfields Ltd’s 70% share of production. This would fully meet the coal requirement of the two CPSUs to set up their power project and protect the interests of the central PSUs.”
Based on the arguments and the reasoning given by the coal ministry, the Prime Minister had approved the proposal on 1 October 2005.
