Demystifying
the “Scam” in the Captive coal sales
On the 3rd October
2013, the English language “The Hindu”[1]
broke the story on selling of coal from captive mines for profit. While the
media has remained uncharacteristically mellow on what would amount to another “Scam”
or a second “Coal gate”; it does raise significant concerns on the concept of captive
coal mining just when the dust on the “Coal Gate” seemed to be settling a bit.
Before we join the media and the opposition parties in the mob lynching
process, let us understand the background of the case.
Firstly, Indian government
allocates “Captive” coal mines to certain companies so that they can mine and
supply specific plants with coal from those mines. Under the Indian laws, they
are not permitted to sell coal as only government companies can sell coal.
Secondly, the Indian coal is
usually low grade; which implies that it needs to be washed to remove
impurities. Apart from the Washed coal, the process also creates byproducts
viz. “Middlings” and “Rejects”. The Middlings and Rejects, though lower grade
than washed coal, are useful for power generation (on par with E and F grade
coal supplied by Coal India).
Certain companies who had been allotted
coal blocks for captive purposes were selling these Middlings and Rejects with
government permission even though commercial sale of coal is not legally
permissible. The Coal Ministry admitted in the parliament that it had permitted
Tata Steel to sell over 9 million tonnes during 2009-2012. With permissions to
sell 3mtpa, Tata group has the option to sell 40% of its 7 Mtpa production. Jindal
Steel & Power Ltd (JSPL) was permitted to sell ~3mt of “Middlings” during similar period apart
from others.
With the permission to see these
middlings and rejects, the government has defacto granted a permit to sell coal
to these so called “Captive” miners using legal loopholes. Further, it may be
noted that this commercial sale of Middlings and rejects infact gives the “Captive
Miner” the incentive to run the coal washery inefficiently. Low recoveries of
washed coal would result in higher tonnages of coal middlings and rejects –
creating a large sustainable coal business.
To be fair, some of the media
articles on the subject are quite informative, especially the Hindu article by
Shalini Singh which quite eloquently covers the details of the matter. You will
read the innumerable articles from the media on the subject and arguments and
counterarguments from opposition and the ruling parties; but beneath all the
cacophony about the “Scams” and “Coalgate”, It is as simple as this, the law doesn’t
allow sale of coals, so a loophole has been found – selling coal in the name of
rejects and middling. And the government actively permitted it.
