The real cost of coal!

We have a loss of Rs.1.86 lakh crore to the exchequer, and the government is not tired of playing one political gimmick after another. As if 2G-spectrum scandal wasn’t enough, UPA Government decided to take make it bigger with the coal-gate with our very own hon’ble PM as the head of the Ministry of Coal. Interestingly, this time out the Government is not facing the guns for its neo-liberal policy per se, but for the way in which it chose to execute the policy.

The Comptroller and Auditor General of India (CAG) in its preliminary report found that the allocation of the coal blocks made between 2004-2008 has cost exchequer this colossal loss. PM Manmohan Singh headed the Ministry of Coal from 2005-2009. The main beneficiaries of the allocation process were major private companies such as Tata Group entities, Anil Agarwal Group firms, Essar Group’s power ventures, Arcelor Mittal, Lanco and Jindal Steel and Power. So, it is not the “small farmer with subsidised power” who ate in to government coffers this time; but it is a bunch of huge corporations, some of whose profits exceed the GDP of a few whole countries out there.

During the whole controversy, the Government has shown great imagination in refuting the charges of corruption. It started with the usual discrediting of the messenger. This time, however, the messenger is the highly credible CAG office whose last claim to fame was the 2G spectrum case in which its report was instrumental in cancellation of the licences and the arrest of the involved Minister, Mr. A. Raja. However, government’s doggedness in fighting the charges comes as no surprise because this time the beacon of its honesty is in the dock himself. So, keeping in step with the usual political diatribe that ensues any given controversy, the government called the report ‘presumptive’ and the methodology 'questionable'.

So, what does the report actually say?

According to the preliminary report of CAG, government gave out the blocks in the nine coalfields of India to the private investors through a screening process. The CAG accusation is multiple fold. Firstly, it says that the government delayed the process of competitive bidding of the mines, and then allotted those blocks to private developers through a subjective screening process. This is what led to the loss mostly. Secondly, some of the private companies who were allotted the blocks did not start the mining activity in time which leads to further profits to these as they can sell coal at a higher price later.

The main beneficiaries of the allocation process were major private companies such as Tata Group entities, Anil Agarwal Group firms, Essar Group’s power ventures, Arcelor Mittal, Lanco and Jindal Steel and Power.

The loss to the exchequer and the attempt to discredit the CAG office by questioning its methodology are serious issues indeed. But that is not the only place where the UPA Government has failed. It has also failed is its own economic ideology- that of profit maximisation. For, the CAG has not audited the government actions on the basis of whom they seek to benefit but on the parameters of profit. This time the government has lost its profit to the private investors. Mind you, this profit, in case of effective implementation, could have benefitted many a lives. But here, we are not even discussing the problem concerning larger issues of governance. CAG also reports that the delay caused in the allocation process itself cost a lot of money. Ironically, the Government in its defense argues that it could not resort to auctioning because it had to expedite the process at the behest of the various state governments. This in no way can however absolve the responsibility of the government to take the most effective route when allocating rights to private players over natural resources of which the State of India is the custodian.

Coal – the black gold

And here we are talking about coal - the black gold. Coal contributes around 54.8% to generation of thermal power in India, and thermal power generates around 80-85% of the electricity of the country. Apart from the generation of electricity, coal is an essential component for various processes in iron-steel, fertilizers, chemical and paper industries. Thus, effectively powering the economic engine of India. India is the third largest consumer and producer of this prized commodity (IEA).

Given the critical role that it plays in the ‘development of the nation’, any government should take allocation of the coal blocks more seriously than what was done by the UPA Government. And if it expedited the process, it cannot now resort to ‘zero’ loss theory just because coal continues to remain in the soil. For if the compulsions of national development makes the government overrule concerns of the inhabitants of an area while implementing projects of national importance, then similar compulsions should force it to penalise private players if they resort to actions that hold back national development. In cases of building large dams and nuclear power plants, concerns of displacements and livelihoods are overruled and often dubbed as impediment for the national development. On the other hand, the cases of corruption by governments and corporates are rewarded with tax relaxations in name of incentivising the industrial development. Why do the compulsions then differ? And, now if we cannot question the government on the substantive issues that affect lives of those living on the margins, like tribals living in the forests 'gifted' for mining, then we at least can rightfully question and be indignant about the delays in the plans that government executes after having overruled these concerns.

The availability of coal and virtual gifting of these blocks should come in for a more critical enquiry given the status of electrification of the country. It is a common knowledge that India is a power starved country. While power outages and long power cuts are nothing new to the country, last month’s grid failure did serve us as a grim reminder of the situation the country is in. Trains were stranded for hours, hospitals ran on generators as did all the commercial establishment, urban life perfectly rendered immobilized. In rural parts of the country, functioning and living without electricity is a daily reality to the 7.8 crore rural households (the 2011 Census). Clearly, while the country grows, the rural households continue to hold the great middle-class consumerist aspirations as a distant dream from another world. In this regard, the 2004 National Common Minimum Programme of UPA government purportedly aimed at completing household electrification in five years time and later changed the deadline to 2017. And the very noble Rajiv Gandhi Gramin Vidyutikaran Yojna (RGGYY) of 2005 aspired for universal electrification of villages. However, the progress of both the programmes is unsurprisingly dismal. Also appalling is the criteria for universal electrification. A village only need to have 10% of its households electrified in addition to its public structures for it to be declared electrified. To this date villages electrified a decade or two back do not have more than 40% of its households that are electrified and the supply remains irregular. And the said coal was going to be mined to help power these dreams that government sells us through different plans and policies. Given these realities, if the scandal is not criminal than what is?

Between development and environmental protection

Even before the CAG report appeared, environmentalists were raising the issue of allocation in the areas that the government itself had marked as ‘no-go’ area for the coal mining. Out of the 57 blocks audited by CAG, 20 fall in the no-go zone with dense forests. According to the government’s defense, delay in mining in some of the blocks is due to them falling in the no-go zone and the ensuing delay in getting environmental clearances. Ironically, the Coal Ministry had circumvented the oppositions of the Ministry of Environment and Forests (MoEF) at the time of the allocation quite quickly and without much ado. Concerns of Jairam Ramesh, Minister of MoEF were also not adequately addressed in order to hasten the process. The opposition that has been stalling the Parliament itself is no saint in this regard. In 2011, Shivraj Patil’s government in Madhya Pradesh had successfully lobbied the central government to overrule the environmental objections in allocation of Mahan field helping Essar Power and Hindalco to start work. He also sat on a fast in February to expedite the clearances, which ended within hours after the assurances given by the PM.

Between development and environmental protection, the concerns for development will always trump those of environmental protection.

Opposition must be purely indignant because they were unable to come up with anything as imaginative and as great in scale as this. So, at this time too, we know that there is going to be no debate in the parliament or outside about the priorities we have set for ourselves. The government will be questioned never on why those areas were allocated in the first place, but on why those were not mined quickly enough. The Government has no lack of ingenuity in anticipating this. So, it has decided to do away with the classification of ‘Go - No-go’ all together. This is only being done in the national interest, again, mind you. It will help give express environmental and other clearances for the coal blocks that are going to be mined, and help take care of the delays.

Between development and environmental protection, the concerns for development will always trump those of environmental protection. And we have known that it was not the agenda anyway. The agenda is growth and is dictated by the interests of crony capitalism. In this scenario, development has just become the predicament of our time - a mammoth that will crush and absorb all the contestation for its own big burp.

So while we debate, demonstrate and protest at the utter lack of ethics in our political class, we somewhere know that this circus will only come to an end when the opposition and the government decide to share the spoils, and both sides become clear about the political gains from the episode. Till then lets just hail the nine percent growth we aspire for and support the state in its relentless pursuit of development.


  1. Power overview, Invest India
  2. IEA (2007), ‘China and India Insights: World Energy Outlook’, International Energy Agency, Paris, pp 423-585.
  3. Sethi, Surya (2012), ‘This expensive bulb is fused’, OP-Ed, The Hindu.