Harish Jharia

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11 September 2012

Coalgate Smile (?): Indian Coal Field Allocation Scam Slaps Losses of $ 33.59 Billion to the National Treasury


                    Smile that turned into a nightmare 
                         click on the image to enlarge

© Harish Jharia

Indian government have allocated different blocks of coal mines during the year 2004 to 2009 to the private and public sector undertakings for mining coal for onward consumption in the Thermal Power Plants run by those enterprises. As per the standing provisions, any such contracts can be given to the venders only through competitive bidding or by auction and not by arbitrary selection and whims and fancies of the ministers and bureaucrats in the government.

Coal fields allocation scam or Coalgate, as it is referred to by the media by equating the same with the US Watergate, is a scandal reportedly committed by the Indian government in arbitrary allocation of the nation's coal deposits to public sector enterprises (PSEs) and private companies. The Comptroller and Auditor General of India (CAG), in a draft report issued in March 2012 have accused, the Government of India of allocating coal blocks in irregular and biased manner.

The CAG's argument is that the Government was expected to allocate coal fields by competitive bidding, but they did not follow this laid down procedure and allotted the coal fields arbitrarily. As a result that the public sector enterprises (PSEs) and private firms paid much less revenue than they would have paid through competitive bidding. The CAG have estimated the "windfall gain" to the private firms as Rs 1,067,303 crore (US $ 193.18 billion). Moreover, the CAG’s Final Report tabled in the Parliament contained the figure at 185,591 crore (US $ 33.59 billion).

         BJP catches the Congress on wrong-foot 

On August 27, 2012 Indian Prime Minister Manmohan Singh readout a statement in the Parliament contradicting the CAG's report for not following the law and coming to a wild conclusion about the exaggerated  loss inflicted to the government treasury.

Thereafter, the opposition party BJP lodged a complaint with the Central Vigilance Commission (CVC), against the government, to probe the matter and find out whether any bribes were paid by the companies at the time of allocation of coal blocks.

The Coalgate scam has received massive media attention, and widespread public outrage. During the monsoon session of the Parliament, the BJP protested the Government's handling of the issue demanding the resignation of the Prime Minister and refused to have any debate in the Parliament. The entire monsoon session ended in a deadlock in Parliament and could function hardly for a weak.

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