India’s Hot, Hot Coal Scandal Involves the Prime Minister, Hindalco, Multi-Million $$$ Deals

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The media has dubbed it “Coalgate” after the infamous Watergate scandal of the 1970s, and the alleged multi-million dollar scam, still to be proven in a court of law, epitomizes all that is wrong with Indian polity.

Not only has it claimed the resignation of one minister and involved Indian Prime Minister Dr. Manmohan Singh, the coal controversy also dragged in one of the biggest names in Indian corporate circles. Kumar Mangalam Birla is chairman of the Aditya Birla Group, which helps run Hindalco, one of India’s biggest aluminum and copper producers.

The so-called Coalgate is all about suspicion around the allocation of huge chunks of coal rich mines (exclusively reserved for public sector units) to private companies, when Dr. Singh also held the coal portfolio in 2005.

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About 18 months ago, India’s central auditor had released a report, containing the major red flag that these coal blocks had been given to private companies on a case-by-case basis in a process that “lacked transparency and objectivity.” Normally, in such cases, the mines are to be auctioned to the highest bidder.

The auditor’s logic was that private companies stood to earn nearly $30 billion USD by selling the coal, so the government could have boosted its revenue by going through a bidding process for the allocation of mining licenses. Why, then, the case-by-case process?

That was enough to arouse the opposition into demanding Dr Singh’s resignation, something that it has not let up on so far. And for nearly two years, the controversy  kept rearing its head in the Indian media, even as the Central Bureau of Investigation (CBI) continued to probe the allegation.

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The first breakthrough came in mid-October, when the CBI named Mr. Birla, one of India’s richest industrialists, in its First Information Report (FIR), which is similar to a preliminary investigation. The FIR also named former Coal Ministry Secretary P C Parakh. This was a big deal, as almost never in India’s  history has such a major corporate player been named in a case of this kind.

The CBI’s contention was that the Talabira coal block in India’s eastern state of Odisha was allocated out of turn to Hindalco for its aluminum plant. In 2005, the Indian government had decided the Talabira 2 and 3 blocks in Odisha should be given to the state-run Neyveli Lignite Corporation, but had then allotted them in favor of Hindalco.

In turn, Parakh retaliated, arguing that if he, the former coal secretary, is to be accused of conspiracy, then the Prime Minister Singh should also be among the accused, since he had approved the revised decision.

Stay tuned for the second part of this post!

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