1. What is the coal scam about?

1. What is the coal scam about?

India has a very big coal reserve and as of 1/4/2011 the geological reserve of coal in the
country stood at 2,85,863 million tonne. Coal is the most valuable and reliable source of
energy to the economy. More than half of India's commercial energy requirement is met by
coal. Under The Coal Mines Nationalisation Act, 1973, coal belongs to the people of India,
and the Government of India owns all the coal blocks. Coal mining can be done either by a
Govt. of India undertaking or any Government Company i.e. a company in which
Government has 51% share. Any other company, including State Electricity Boards must be
allotted coal blocks by the Government of India before they can make use of them. However,
after an amendment in the nationalisation Act in 1993, coal blocks could be allotted to private
companies for captive mining to accelerate power, steel and cement production.
As early as June 2004, the Coal Ministry proposed that coal blocks which had thus far
been allocated for free, must be auctioned off for the highest price possible. However, the
UPA government, under the leadership of Dr Manmohan Singh, deliberately delayed introducing
this system of auction, and continue to do so - so that they can give away the blocks
for free to companies, presumably in return for kickbacks. The people of India did not benefit
- but members of the UPA Government and their cronies definitely did.
The CAG's Performance Audit of Allocation of Coal Blocks and Augmentation of Coal
Production (Ministry of Coal) has found that the government has failed introduce the auction
route, though it could have done so as early as 2006, causing tremendous loss to the
public exchequer. The CAG has made a very conservative estimate of approximately Rs. 1.86
lakh crore of financial benefit having accrued to private companies.1
2. What does the CAG report say?
In addition to estimating a significant loss to the exchequer, the CAG report has also
highlighted the inefficiency of the UPA government, and more particularly the Ministry of
Coal. The audit found that allocation of coal to private players was done in a non-transparent
and discretionary manner.
Further, the Ministry of Coal, headed by the Prime Minister Dr Manmohan Singh
between 2006 and 2009, failed to discharge its duties of oversight, allowing private players

to take blatant advantage of the coal blocks allotted to them for free. The audit also found
that, though the government gave away coal blocks for free, most companies did not begin
production at all. All that happened under the UPA government was that the people of India
suffered loss.
3. Since when have private companies been allowed to mine coal?
1973 : Coal Mines (Nationalisation) Act 1973 (CMNA) allowed for the nationalisation of
the coal mines, thus bringing them under state control.
1976 : Amendment of CMNA to allow private companies producing iron and steel to mine
coal for captive use. Captive use' means that the coal produced has to be used for
the purpose it was allotted.
1993 : CMNA amended again to include power-generation companies to mine coal for
captive use.
2003 : Electricity Act passed - private companies allowed to generate power. Demand for
coal starts increasing.