Sunday, August 26, 2012

BJP wanted to extend “no auctions” coal policy to all private companies (not just for captive power production)….

In the political ruckus over the CAG’s report on coal, many of the real political issues – the real debating points if ever there was to be a good one – have got totally buried. I was doing a general search on coal allocations on the internet and I stumbled upon the BJP government’s approach to coal allocations when it was ruling between 1999 and 2004. What I found was shocking to say the least. No where has this come out till now – neither in media, nor in any of the Congress’s rebuttals either.

So far we have only believed that the NDA government had followed the precise same “no auctions” policy that the UPA government did till it thought of auctions. We have also known that BJP CMs were opposed to coal auctions and lobbied heavily to have auctions delayed. But now it seems that the BJP actually went way beyond this to spread the policy of free coal allotments far and wide. In fact, it wanted to extend the “no auctions” (only allotments) policy to all private companies for sale. Until then, captive mines were permitted only to select private companies which were in the business of power, steel or cement manufacturing. If the BJP had had its way, the CAG’s implied “loss to the exchequer” would have been many times more….as the automatic check that existed for at least the power generation companies that got coal blocks free (reverse auctions on power tariffs) would have been absent for such private companies. Today of course, the BJP is singing a different tune…..saying that the Congress didn’t want auctions. How strange!

In the year 2000, the BJP had moved an amendment to the Coal Mining (Nationalization) Act 1973 (CMNA) which was aptly titled the Coal Mine (Nationalization) Amendment Bill 2000. The bill was introduced in the Rajya Sabha, but could not be passed because of stiff opposition from the Left parties. The Left as always opposed anything that enlarged the scope of the private sector.

In the “Statement of Objects and Reasons” part of the 2000 amendments act, laying the foundation for the amendments, it is stated that “Keeping in view the estimated addition of the coal based thermal capacity in the country by the end of the tenth plan, it is assessed that the demand supply gap of coal by the end of tenth plan would be around 235 million tonnes. It will not be possible for the nationalized coal companies and captive coal mining companies to bridge this huge gap. Import of coal to meet this emerging shortage is not a sound step in the interest of the economy”. Further explaining the background to the amendments, it adds “Under the powers conferred on the Central government by Section 3 of the Act (the original Coal Mines Nationalization Act), a Gazette notification was introduced in March 1996 permitting the cement producing companies also to mine coal for captive consumption. It is necessary to increase investments in coal production and make coal available to meet the needs of the economy. For this purpose, it is proposed to amend the Coal Mines (Nationalization) Act 1973.” That’s how the BJP thought of giving free coal blocks to all private companies.

The heart of the amendments proposed was in the Section 3(A) inserted after the original Section 3 of the principal 1973 act. Section 3(A)(1)(c) says “Notwithstanding anything contained in Section 3 and on and from the commencement of the Coal Mines (Nationalization) Amendment Act 2000, any company may carry on coal mining operations in India in any form either for own consumption, sale or for any other purpose in accordance with the prospecting license or mining lease or sub-lease as the case may be”. The word “company” has been defined in the standard way as per Section 3(1) of the Companies Act 1956. The only exclusions to this list of private companies were foreign companies.

The essence of this amendment is that the restriction of “captive mining” was being removed. The coal mining sector was being thrown open to the entire private sector. Frankly, in my mind, this was a progressive change and I have always supported the scrapping of the CMNA itself. What I don’t support is the BJP forgetting this initiative of its own and accusing the Congress of corruption. If anyone had intentions of corruption, it was the BJP.

However, what is important to note is that while bringing about this amendment, even the thought of auctions did not cross the BJP’s mind. So if it had its way, the process of “allotments without auctions” would have extended to all private companies. Under the extant policy of the time, free coal blocks were assigned largely to power companies which at least had to take up the onus of supplying power at the auction-determined “cheapest” rate. If the sector had been thrown open to the private sector “for free” and “without any auctions”, what would have been the potential loss?

The BJP had taken the same approach for 2G spectrum – where right till 2004, it kept charging nothing for spectrum that was included in the original entry fee, nor for any additional spectrum that was given away to telcos subsequently. What the BJP did during its tenure was fine; when the same policy was continued by the Congress, it became a case of corruption! In both the 2G and the Coal cases, it is clearly seen that the BJP prefers to ignore its own policies when it was ruling, but wants to put the noose around the Congress for following the same….

The other point I want to make is that the “informed debate” we should have in Parliament or in media simply doesn’t take place. Since Parliament is not being allowed to function by the BJP, its difficult to speculate if the informed debate would take place there. But at least in media can we expect such an informed debate? But I have still not found a single anchor on news TV informed enough to research the matter and take on the BJP for its double standards. Does any TV journalist know of this 2000 amendment that the BJP had introduced in Parliament? If he/she does know, has he/she done anything to grill BJP spokespeople on TV? Not at all….not surprising why Justice Markandey Katju called journalist uneducated!

The real truth is that the BJP is the last party to have anything to say on the subject of coal allocations. Not only did the NDA do nothing to bring in auctions, it in fact tried to spread the “no auctions” policy even wider. How can a party that wanted to extend free allocations to the entire private sector ask for the PM’s resignation when it was the PM who thought of bringing in auctions?????

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