Coalgate Scam

1. Lets Burn
Coal!!
---The “Coalgate” Scam
Presenters:
Parnamoy Dutta (13)
Malvik Majithia (24)

2. Introduction:-
 What this article is about?
 De-allocation of coal mines.
○ e.g: Excess allocation to RIL.
 Production did not meet expectations.
 Allocated at throwaway prices.
 Who are involved?
 Ministry of Coal.
 Ministry of Finance.
 Power and Steel companies.
 Prime Minister’s Office.

3. Coal and the Indian
Economy:-
 Accounts for 67% of total energy
consumption.
 Meets 52% of primary commercial energy.
 66% of power generation is coal based.
 Mining Sector contributes 2.25% to the
GDP.
 Industry Sector which is the main consumer
contributes to 14% of the GDP.

4. Some more numbers:-
58 coal blocks stuck
due to external
factors
23 coal
blocks de-
allocated
till
December
2011
18 blocks expected
to start production
soon
9 coal
mines in
full
production
218 coal
blocks
allotted
so far

5. The Scam:-
 Companies with no prior experience in
mining were allotted coal blocks.
 Allotment based on recommendations from
various high profile individuals.
 17 companies who didn’t show up at the
before screening committee were allotted
coal blocks.
 Screening committee was made most
powerful within 5 months of UPA 1.
 Windfall gains to private players.
 “No-bid” process.

6. Why Preferential
Allotment:-
 Defensive Government Strategy due to:
 Concerns of State Governments.
 Need to amend associated acts.
 Gestation period of 3-7 years.
 To keep the prices low.
 Corruption.
 For interests of CIL.

7. Why is the government under
scanner?
 High cost of merchant power.
 Low production of coal.
 Gestation period of most mines are over.
 Even after repeated reports of audit
committees auctioning was not implemented.

8. Government actions:-
 Asked for show-cause notices from
operators of 58 coal blocks
 provide details of investments
 provide progress on projects
 provide details of mine development
 De-allocation for those who
 Have not seriously followed up for clearances
 Have not invested in setting up end plants
 CBI will investigate allocations done in a
“wrongful manner”.
 IMG’s recommendation after investigation.

9. Pros
• Freeing of
resources for
judicious use
• Better pricing of
end products
• Incentive to
NPAs
Cons
• Diverse effect on
Banking sector
• Conflicts with
Environment
Ministry
• Could lead to an
oligopoly