The coal block verdict, a new law and the concerns ahead

Pratim Ranjan Bose

The picture isn't quite clear.

Four months is too early to asses a government, especially the one that has shown sufficient enthusiasm to bring the growth momentum back.

Yet, the recent course of events following cancellation of 204 captive coal block allotments, by the Supreme Court of India, leaves some doubt about the intentions of the Narendra Modi government.

The coal block verdict

In a two-part judgement (August 25 and September 24 ) the apex court held that:

(a) The government arbitrarily allotted assets to the private sector (captive dispensation or screening committee route) since 1993. All such allotments stands cancelled with effect from April 1, 2015.

(b) Commercial mining by State or provincial government-run companies was contrary to the provisions of Coal Mines (Nationalisation) Act 1973. Also, the prevailing practice of State-owned companies transferring ownership of mineral assets to private miners, through joint ventures, was ‘illegal’.

The net result: All but two allocations, in government sector, are cancelled.

(c) The de-allocated captive miners – either in private or the State sector – are asked to refund the government Rs 295 for every tonne of mineral extracted from these assets.

Taking a leaf from the milestone report by the Comptroller and Auditor General of India (CAG) in 2012, the court held that this is the windfall gain pocketed by the private sector captive miners or passed on them by the State sector through JVs.

Justice prevailed

There are couple of issues with the actions taken on coal block allotment scandal, so far.

Penalties were imposed rather arbitrarily. Even the court was aware of it. But it failed to probe the issue in detail as the government was insisting on early resolution to the impasse. 

More importantly, the political class remained unpunished for flouting rules (in connivance with the industry) and creating such a mess.

We have seen India’s IT minister landing up in jail in 2G-scam. Can’t we expect the same treatment to the culprits of the Coalgate scandal? 

True, a CBI enquiry is on, to take the conspirators to task. But, it is not yet clear if the investigators are out there to nab the culprits or to protect them?  

Limitations apart, there is no denying that the verdict (and the series of verdicts over last couple of years), is a watershed. It sent a shock wave to the unholy nexus between India’s highly corrupt political class and crony capitalists.

I rejoiced the judgement.

New laws for what?

It was now the job of the government to ensure transparent distribution of captive resources, and bring the economy back on the rails.

The government responded by framing a new law – The Coal Mines (Special Provisions) Ordinance, 2014 - on October 21. 

An ordinance is a law, enacted by the government without prior discussion (or permission) in the Parliament.

The government cannot be faulted for this emergency measure, as it had only six months to settle the issue, before the existing captive miners are forced to stop operations. 

But why should the new act challenge the exclusive domain of State in commercial mining of coal? Section 4(2)(b) of the new act clearly gives the government administrative power to offer blocks to any company for commercial exploitation.

On behalf of the Modi government, the finance minister Arun Jaitley described it as an enabling provision but, not for immediate use. 

But that hardly answers the question.

The issue is not merely about liberalisation of the coal sector – no matter, how debatable the issue is. The concern is if the government is attempting privatisation of the sector through the backdoor.

A bill to open up the coal sector is pending at the upper house (Rajya Sabha, the council of states) of the Parliament since 2000. The government had the option to deal with the issue separately. It didn't.

Incidentally, despite winning the 2014 generation election with a thumping margin, Narendra Modi’s BJP is a minority in the Rajya Sabha.

Evidently the government is trying to first create a case, avoiding public debate, and hoping to achieve ‘political consensus’, by the time the Ordinance comes up for discussion in the Parliament.

How the government achieves this goal, is yet to be seen. Will they try to win over the Opposition by debating the issue on the floor of the Parliament or by striking political deals by pushing its opponents on the back foot, as has been the practice for last couple of decades?

I don’t have ready answer to these questions. But a couple of issues are intriguing.

Tricky issues

One such issue is the deafening silence about the fate of industries worth billions of dollars earned in the past, through allotment of captive resources that were unlawfully awarded by the government.

The Supreme Court verdict created space for transferring the assets to the national miner, with an underlying clause to ensure supply of fuel to the linked industries. The government didn’t exercise the option.

The ordinance also offered scope for transferring assets to the concerned state-level miners for due supplies to the affected industries. But, if the country’s coal secretary is to be believed, this option is not considered either. 

The impasse will surely hit the industrialisation agenda of coal rich states – especially Odisha, West Bengal, Jharkhand, Chhatishgarh and MP – which counted on availability of fuel to attract industries.

Many will love to believe that the Narendra Modi government will use the opportunity to corner its political opponents in two large coal-bearing states – Odisha and West Bengal.

This is of course not the only possibility.

A couple (3 to 4) business groups cornered nearly 15 per cent of the assets distributed by the former Congress-led UPA (2004-2014), to private sector, without competitive bidding.

One of such groups, led by a Congressman, today contributes a lion’s share of the captive production and is probably the single largest investor in linked end-use plants, during the last decade. A majority of this investments went to Odisha.

With the change of guard in Delhi, this group is now accused of many irregularities.

Heard it through the grapevine, the government is not keen to offer them an easy lifeline, by announcing a programme to rescue the captive mine operators.

The same old vindictive politics?

There is little doubt that the guilty should be booked. The nation is tired of watching business-politics nexus looting its resources.

But, it is also true that the nation is sick of vindictive politics that puts political agenda ahead of the growth and development.

The UPA government, for example, was tough against a business group (which is also accused of irregularities) that made the most of the disinvestment programme of the previous BJP-led NDA regime (1998-2004).

The situation went to such a passé that top congress leaders were found openly raising concerns against a multi-billion dollar project pursued by the group, in Odisha.

Hopefully, the Prime Minister Narendra Modi will free the nation from the legacy of vindictive politics.

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(Disclaimer: Graphics are collected from the web. Will be removed in case of any objection)

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