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Sriprakash Jaiswal, Union Coal Minister, Affairs in the Ministry

20 Feb 2013

Following the draft report by the Comptroller and Auditor General on coal blocks being allocated to firms without bidding, the opposition stalled the functioning of the Parliament several times demanding discussion and tabling of the report. Union Coal Minister Sriprakash Jaiswal, who is at the helm of affairs in the ministry, spoke to InfralinePlus’Alok Sharma and categorically denied the charge, saying that the ministry did not deviate from the rules and regulation meant for block allocation.

Sir, the CAG draft report has raised significant questions on the process of allocating coal blocks between 2004-2009. According to the draft report the firms had made staggering gains worth Rs. 10.67 lakh crore. Please throw light on the issue.

The report is yet to be tabled in the Parliament, so it would not be fair to jump the gun before the report is made public. However, I want to clarify that there was no foul play in allocating the blocks. The government followed all necessary procedures. It placed advertisements in newspapers for allocation of coal blocks and invited applications. When interested parties applied, the ministry consulted concerned state governments before giving away the blocks to the firms.

The coal blocks were allocated through a screening committee headed by Coal Secretary. One also has to understand that the dynamics of the (coal) sector have changed over the past few years.  Coal commands premium now but it was not the case earlier... That time when the blocks were given (without auction) there was not much demand... naturally, there was not much value.

But, what is the rationale in inviting bids for coal blocks now?
See, one has to wait for the right time to go for a change (in the process). In mid 2000, there were not many companies interested in acquiring coal blocks. Even if we had gone in for the bidding, I would not assume that investors would have come forward… With so much of perceived value in the blocks, bidders will come.
Does government foresee a better price for itself while auctioning coal blocks.

Allocation of coal blocks was never looked upon as a potential source for generating revenue for the Central Government. The intent of the government was to induce rapid development of infrastructure which was so very essential to keep the economy on a high growth trajectory. Hence the question of maximizing revenue does not arise at all. The idea of introduction of bidding cropped up only in the wake of increasing demand for captive coal blocks and the consequent necessity of putting in place a process which is demonstrably more transparent.

As the economy grew in size, the demand for coal also grew, particularly due to expansion in the energy sector. It was felt that Coal India Ltd alone would not be able to meet the growing demand and, therefore, the option of giving a bigger role to the private sector was explored.

What are the measures that the government plans to follow in ensuring that the blocks are given to serious players only? Given the increasing gap in demand and supply of power, there is a need to ramp up coal output.

The government has already issued show cause notices to a number of firms that were sitting on the blocks. We have asked those firms to explain as to why was investment not made towards developing the block. After carefully going through the responses, the ministry will take a call on de-allocation of the blocks.

The government has already incorporated bank guarantee clause, to inject seriousness among the bidders. Going forward, no company will be allowed to sit idle on the resources.

With finite natural resources and coal companies facing issues of strikes, monsoon and naxal problems, how would government ensure optimum output from existing mines.

(Smiles…) Unfortunately, the government has not found any solution against the monsoon. But we are working towards acquiring mines overseas to boost the supplies. We are planning to set up a fund to help public sector companies in acquiring coal assets overseas. Though, Coal India Ltd (CIL) has surplus resources for investing outside, we feel that the government should provide additional financial support in buying stake in large assets outside the country.

Here, I would also want to add that the boards (of PSU companies) need to be proactive as any delay in reaching a may result in losing the opportunity.

There are many power producers including state-owned NTPC, which is not comfortable with the penalty clause in fuel supply agreement. Is there any scope to change the penalty clause, as companies believe that it is biased towards Coal India.
Not everybody has a problem. Some companies have already signed FSAs with Coal India. However, we are trying to address their issues. If required we may re-work on the penalty clause. But, I believe Coal India will be able to supply raw material to companies as per their agreement.
What is the progress on coal regulatory bill?
Cabinet discussed the issue and it was then decided that Empowered Group of Ministers should look into the concerns. Once EGoM discusses the issue, we may then proceed further.

(InfralineEnergy thanks Sriprakash Jaiswal, Union Coal Minister for sharing his valuable insights with our readers. The column 'In-Conversation', is a platform to engage experts from various sectors to share their views on the different transformations happening in the Indian energy sector.)