Coal news and updates

The coal scam just got deeper

Govt panel to look into alleged diversion of allotted coal by BS Ispat Ltd for suspected power generation

The government has set up an inter-ministerial panel to investigate the suspected “diversion and theft” of coal in the case of B.S. Ispat Ltd, according to documents reviewed by Mint— possibly adding another layer to the scandal involving irregularities in the allotment of coal mines that is being probed by the Central Bureau of Investigation (CBI) under Supreme Court supervision.

Although the government is investigating just one such case, there are other firms that are suspected of the same wrongdoing, said a government official who asked not to be identified.

The scale of the irregularities seems large, said Amol Kotwal, associate director, energy and power systems practice for South Asia at consulting firm Frost and Sullivan.

The inter-ministerial committee is investigating the alleged diversion of coal allotted for an associated sponge iron plant of Nagpur-based B.S. Ispat—which has interests in coal mining, power generation and steel manufacturing, according to its website—for suspected generation of electricity for commercial sale.

“While the captive coal block was allocated for its sponge iron plant, it is being used by the company for power generation. The power generated has been sold to the grid,” said a second government official who asked not to be identified.
Mint couldn’t contact the spokesperson for B.S. Ispat Ltd and repeated phone calls to the Nagpur office of the company went unanswered. An email sent to the company on Monday had elicited no response as of press time on Wednesday. The coal ministry officials did not respond to an email seeking comment.

“This is a case where a company is using the fuel for purposes other than stated on which basis it was allocated the coal block. While there have been other companies who are adopting this dubious practice, this particular case has caught the government’s attention,” said the government official cited in the first instance.
B.S. Ispat’s website claims that the firm has “taken two coal mines on lease for a period of 30 years located at Marki & Mangli. Coal is directly used for providing heat energy in railways, industries and households and as a reducing agent in some industries.”

On 18 March 2008, Mint first reported significant irregularities in the Union government’s award of coal blocks.
In 2012, after the Comptroller and Auditor General of India submitted a report in Parliament alleging a notional loss of Rs.1.86 trillion to the exchequer due to the irregular allotments, CBI started investigating allocation of captive coal fields between 1993 and 2010 as part of a Supreme Court-monitored probe. The government auditor also claimed the blocks were awarded in an opaque manner.

On paper, diversion of coal from a captive coal block is reason enough for the allotment to be cancelled.
“The guidelines for captive coal block allocation very clearly asked the applicant for the details of the end-use project and upon allocation, the applicant was required to submit an affidavit that all coal mined from the captive block shall exclusively be used in the end use project. Any violation of that, in terms of diverting it to another project, even if owned by the same group would attract cancellation of the coal block,” said Debasish Mishra, a senior director at audit and consulting firm Deloitte Touche Tohmatsu India Pvt. Ltd.

Yet, at least some firms have sought to cash in on the opportunity presented by such allotments.
“The controversial coal block allocation policy has turned out to be a gold mine for several individuals and entities,” said Frost and Sullivan’s Kotwal. “Besides instances of non-serious entities reaping huge gains by selling off the allocated blocks without developing them with the planned iron or steel projects, names of entities are doing the rounds who have flouted norms for end-use of allocated coal blocks,” he said.

Former coal secretary P.C. Parakh alleged in a book released earlier in April that the authority of Prime Minister Manmohan Singh in defining the process for allocating the coal blocks was undermined by former coal minister Shibu Soren and minister of state for coal Dasari Narayana Rao.

Kotwal is in favour of a comprehensive review to ascertain the extent of the practice.

“How large this scam could turn out could only be assessed once the government completes a detailed review of the progress of all coal blocks allocated to firms for captive use,” he said.

Source: www.livemint.com