DECISION ON AUCTION DELAYED DELIBERATELY

DECISION ON AUCTION DELAYED DELIBERATELY

Officers of the Coal Ministry proposed allocation of captive coal blocks through auction or
competitive bidding at a meeting on 28 June 2004 (just a month after UPA-2 came to power). In
a note on the subject the then Secretary (Coal) told the Minister of State for Coal and Mines (at
the Cabinet level, the portfolio was then directly held by Prime Minister Manmohan Singh) that
could not be open to any other interpretation.

The Secretary's note said: "Since there is substantial difference between price of coal supplied
by Coal India and coal produced by captive mining, there is a windfall gain to the person
who is allotted a captive block". The note also told the Minister that the "bidding system will
only tap part of the windfall profit for public purposes". As the CAG has noted in his report,
despite all these warnings and proposals, until now, no finalisation of the process of competitive
bidding has taken place.
It is plain as daylight that the Minister of State in charge and the Prime Minister and the
Congress party were fully aware of the "Windfall Profits" in the process of allocating coal blocks
for captive mining and jumped at the opportunity to profit from it.
From 2004 to 2012, for eight long years, a sham is staged, apparently to decide on the auction
route. It never reaches a conclusion. It was never meant to. And in the interval, the allocation
of captive coal blocks goes on through a so called screening committee, in which Union
Government bureaucrats are the overwhelming majority and a lone state government representative
is called in to present a veneer of "consultation".
The most interesting part of this contrived process is the studied delay in deciding on allocation
through competitive bidding. The proposal of the Coal Secretary for competitive bidding
is circulated to state governments and to the Ministry of Law and Justice. It takes two
years for the Law Ministry to give an opinion that such bidding could be introduced through
administrative order. Instead of taking that path, the Government once again refers the matter
to the same Ministry on the plea that there are conflicting opinions on the bidding process.
Within two months of the earlier reference the Law Ministry, as if acting on directives, suggests
it would be better to amend the Mines and Minerals Development Act (MMDR) before
initiating mandatory auctions. Even then the step to amend the Act is taken at a leisurely pace.
The huge time lag between the Secretary of the Ministry proposing competitive bidding and
actual steps to amend the Act to make bidding possible, and further delay in making the rules
on the basis of the amendment to the Act takes eight long years. A look at the following dates
exposes the real intention of the Government-to delay the resort to competitive bidding so that
the Ministry remains free to allot the captive mines to whomsoever it chooses.
28 June 2004 : Coal Secretary proposes competitive bidding
16 July 2004 : Coal Secretary's note warns of windfall gain to the person allotted a
mine
30 July 2004 : Coal Secretary warns that screening committee system of allocation,
even with changes, would not be able to achieve transparency and
objectivity.
11 August 2004 : The Prime Minister's Office initiates a note saying there are disadvantages
in competitive bidding for allocation of coal blocks.
25 September 2004 : In response to this note the Secretary (Coal) submits a draft note to
the MoS saying there is hardly any merit in the PMO's objections to
auctioning. He also said that the screening process would be subject
to several pulls and pressures and insisted on competitive bidding.
Now begins a new process to avoid competitive bidding that clearly exposes the interest of
the Congress in keeping mine allocation as its private preserve.
The Minister of State writes on 4 October 2004 that competitive bidding will delay allocation
further and therefore need not be pursued. On 15 October 2004 the Secretary reveals that a
meeting held at PMO "felt" that since large number of applicants were there who applied on the
basis of existing policy, it should not be changed and the bidding therefore be only prospective
and not apply to mines selectively allocated till date.

Finally, the PMO itself notes:"the change in the policy of allocation of coal blocks for captive
mining will be made effective prospectively. therefore there us no urgency in the matter"(that
is, to enforce competitive bidding).
This clearly shows the Government at the highest level, that is, the Prime Minister himself,
was committed to the existing process and was not at all keen that competitive bidding should
be introduced. Another two years were to pass before an amendment to the MMDR Act to provide
for bidding was drafted. And yet another two years for the amended Bill to be moved in
Parliament. Then a further two years from the time the Bill is passed in Parliament 2010 for the
rules to be notified in 2012. The guidelines for competitive bidding are yet to be finalised. If not
for BJP's continuous pressure on this government to do the right thing, perhaps this too would
take another two years.