BIGGEST SWINDLE SINCE INDEPENDENCE

BIGGEST SWINDLE SINCE INDEPENDENCE

The difference between earlier scams and Coalgate is that in this the corruption trail leads
directly to the Prime Minister Dr. Manmohan Singh who held the Coal portfolio during much of
the time the events occurred. This leaves not even a fig leaf for the Congress to hide behind.
The ruling party had earlier sought to evade responsibility for the 2G scandal by blaming its ally
DMK whose nominee A Raja was the Minister of Telecom during spectrum allocation. The CWG
pay offs were similarly blamed on officials and a Congress leader who headed the games organising
committee.
Simply put, Coalgate is about the allocation of coalmines to several private parties free of
cost on the plea that the coal is required by them for projects to generate power, which is in
severe short supply, as well as to make steel and manufacture cement. The allottees were
required only to pay the usual royalty on the mined coal to the state government apart from the
usualtaxes and levies.
In India, Coal is the most important indigenous source of energy for industry. India has one of
the world's largest coal reserves estimated at 2,85,863 million tonnes. Coal mining is directly governed
by the Coal Mines Nationalisation Act 1973, as amended in 1993 to permit private extraction
through captive mines. Coal India Limited (CIL), a public sector company, mines all the coal for
sale to various industries and consumption at a price determined largely by the Government.
The Act provides for allocation of "captive" coal mines to industries for their own use.
Currently Coal India is unable to meet all the demand for coal by various industries, mainly those
like power generation, steel and cement that are the major consumers of coal. The huge gap
between demand and supply of coal is fertile ground for black marketing and generating illicit
funds for mine owners. There is illegal extraction of coal, estimated at between 6 and 15 per
cent of total production.
The allocation of coal blocks to specific private users was justified on the ground of CIL's
inability to meet industry demand. How the allocation should be done and to whom was the
core of the issue. Had this been done on the basis of an open auction, at least after the
demand for energy boomed in the wake of the NDA Government's highly lauded, growth oriented
economic policies (1998-2004) the Government would have gained most of the difference
between the price of coal it mandates and the open market price of it as the allottees
would have competed for giving the maximum benefit to the Government. This is the origin of
what turned out to be a massive means of enriching the ruling party at the expense of the
Government