Coal Scam

Vassal States?

Print edition : January 24, 2014

An opencast coal mine in Chhattisgarh. Photo: RUPAK DE CHOWDHURI/REUTERS

The Jindal Power and Steel Ltd complex at Nisha village in Odisha. The State government says that the company, which was awarded two coal blocks in Odisha, has not yet qualified for a mining lease and has not started production. Photo: RUPAK DE CHOWDHURI/REUTERS

Odisha Chief Minister Naveen Patnaik. Photo: M. VEDHAN

The affidavits filed by State governments in the Supreme Court in the coal block allocations case indicate that the Centre considerably curtailed their role in the decision-making process and ignored their concerns over key issues.

EVEN as the Centre tried to pass the blame on to the States for the irregular allocation of coal blocks, the affidavits filed by the States in the Supreme Court earlier in December indicate that the State governments were merely accorded a mechanical role in the process despite statutory provisions mandating them to perform a significant role. Two public interest litigation (PIL) petitions seeking the cancellation of coal block allocations made in an irregular manner from 1993 to 2012 are before a three-judge Bench headed by Justice R.M. Lodha.

The Supreme Court had issued notices to seven States on September 26 asking them to explain their role in the process of allocation of coal blocks following Attorney General Goolam E. Vahanvati’s argument that the allocation was only the first step and did not by itself confer any mining rights on the allottees. The affidavits filed by the governments of Jharkhand, Odisha, Madhya Pradesh, Maharashtra, Andhra Pradesh, Chhattisgarh and West Bengal indicate that the participation of the State governments in the screening committee meetings went little beyond a mere formality.

While some State governments acquiesced, others raised specific objections to the allocation process, only to be overlooked by the Centre. This is borne out especially by the submissions of the Odisha government, which show how several objections and concerns raised by Chief Minister Naveen Patnaik in a series of letters to the Prime Minister were not addressed seriously by the Ministry of Coal.

The legal framework

The statutory provisions on allocation of coal, governed by the Coal Nationalisation Act, 1973, and the Mines and Minerals (Development and Regulation) Act, 1957, define the roles for the Centre and the States in the matter. The recent revelations indicate that the involvement of State governments as stakeholders was considerably curtailed by the United Progressive Alliance (UPA) government. As per the Coal Nationalisation Act, the Centre can decide what kind of industries or companies will be allowed to get coal. Section 3 of the Act says that coal can be allocated to companies engaged in the production of steel or cement or any other industry that the government may notify. However, the Act does not give the power of allocation to the Centre. Under the Mines and Minerals Act, the power of allocation of all minerals, including coal, is with the State government. For some scheduled minerals, such as coal, the State government is required to get the consent of the Centre.

Speaking to Frontline, the advocate Prashant Bhushan explained the legal framework that governs coal allocation: “Ideally, the legal regime is that the power of allocation is with the State and it needs the consent of the Centre and the Centre will also decide what the end-use industries are for which coal mines will be granted. However, de facto what was happening was that all allocations were made by the Centre and applications were directly received by the Centre. The Centre was making the allocations and thereafter the State governments were only doing the formality of ensuring that land was acquired for the company, that they got their mining plan approved, and that they got environmental clearance, and so on. The Centre used its power of granting or withholding consent to take over the whole process of allocation.”

Environmental concerns

The Odisha government’s affidavit states that the views offered by the State government were not determinative in the final decision-making process and that the eventual decision was taken entirely at the discretion of the Central government. It further states that the allocation of coal blocks was made by the Centre from 1993 to 2012 by evolving its own mechanism of constituting a screening committee and the State government was only left to carry out the formality of processing the application and execution of the lease deed, subject to statutory clearances by various departments under the Forest (Conservation) Act, 1980, and the Environment (Protection) Act, 1986. The State government had raised its concern that the end-use projects in favour of public sector units (PSUs) in Odisha were far fewer than the allocations made in favour of PSUs of other States. In a letter to the Prime Minister on January 1, 2008, Patnaik highlighted the disproportionate allocations made by the Central government. He requested that the allocations be put on hold until a decision was taken with regard to the complaint of Odisha State PSUs. He reiterated his request for allocation in favour of State PSUs in a letter dated February 24, 2010.

Patnaik also highlighted his concerns about the allocation of coal blocks to companies that were not serious about setting up end-use plants and the environmental and social implications of some of the projects. In a letter on February 2, 2011, he drew the Prime Minister’s attention to the unplanned allocation of coal blocks in Odisha and its social and environmental impact, which had to be addressed by the State alone. Patnaik suggested that the Ministry of Coal get all coal block allocations reviewed immediately by a high-level committee which should have a State government representative as a member. This proposal was never considered.

Misuse of allocation

Another letter that Patnaik wrote in January 2012 states: “Some companies that have been allocated coal blocks for captive use of coal in their respective end-use plants do not appear serious in setting up their ‘end-use plants’ for which coal blocks have been allocated. On the other hand, some of them are entering into ‘agreement’ with ‘other parties’ for supply of coal to them (other parties) for their power plants. This type of arrangement for sale of coal ignores the very principle of ‘captive use of coal’—allocation of coal blocks to such non-serious parties should be cancelled.

“The manner in which 32 coal blocks have been allocated in Odisha coalfields to 55 companies will need acquisition of a vast land area of more than 325 sq km, with displacement of more than 2 lakh people. You will appreciate it is difficult to execute the development of the allocated coal blocks in Odisha with such large-scale land acquisition and displacement of lakhs of people. In view of requirements of coal no further coal block from Odisha coalfields should be allocated to any other party, also Government of India Coal Ministry should immediately get all coal block allocations in Odisha coalfields reviewed by a high-level committee which should include a State government representative—all the points raised above should be examined by the said committee.”

The affidavit filed by Odisha details the present status of the 33 coal blocks allocated by the Centre in the State. Of these, the Odisha government has executed the mining lease for only one—the Talabira coal block, in favour of Hindalco Industries. While Monnet Ispat Energy Limited was awarded the Utkal-B23 block in Talcher in October 1999, and Jindal Steel and Power Limited the Utkal B1 block in Talcher in November 2003 and the Ramchandi Promotion block in Talcher in February 2009, according to information furnished by the State government, these companies have not yet qualified for a mining lease and consequently they have not started production.

Other States’ view

The affidavit submitted by Jharkhand said the State government participated in the meetings of the screening committee whenever invited. The Maharashtra government’s affidavit stated that as per its understanding, it is the obligation of the State to grant a mining lease for coal to a person selected for coal mining by the Centre for the specified end use. It highlights how the process of having a member of the State on the screening committee was reduced to a mere formality. Even though the State government was invited for the meeting of the screening committee, the Centre did not seek the recommendations of the State in respect of coal block allocations. The affidavit states that the role of the State government is to “facilitate” land acquisition in favour of the lessee under the Land Acquisition Act, 1884, and that the allocation letter confers the right to a mining lease upon the allottee.

The Chhattisgarh government said that although the State participated in the meetings of the screening committee post 2005, it considered the allocation of a coal block by the Centre as final. Its submissions also indicate the limited role that the States were allowed in the screening committee meetings organised by the Centre. The affidavit points out that the State government, in placing its comments before the screening committee, considered prioritising end-use projects located within the State instead of out-of-State end-use projects. However, according to data provided in the affidavit itself, of the 15 coal blocks in the State allocated through the government dispensation route, nine had been allocated to PSUs of other States.