Author: Rajesh B Nair
Publication: The Hindu
Date: September 26, 2012
URL: http://www.thehindu.com/news/states/other-states/how-a-firm-spurred-government-body-to-seek-captive-coal-mine/article3936170.ece?homepage=true

It appears to be a strange case of a private firm spurring a government body to seek a captive coal mine.

 In December 2006, the government body — the 38-year-old Pondicherry Industrial Promotion Development and Investment Corporation (PIPDIC) – had apparently no idea to seek a coal block until it received an “unsolicited offer” from the private firm — J R Power Generation Private Limited (JRP), which had no prior experience in coal mining or power generation — for a coal mine development project.

 In a matter of weeks, PIPDIC took a formal decision to approach the Coal Ministry for allocation of a block. A week later, it submitted a formal application to the Ministry, seeking allotment of coal block equivalent to 530 million tonnes (MT). On the same day (January 17, 2007), the Corporation signed a memorandum of understanding (MOU) with JRP, a company owned by the family of S. Jagathrakshakan, now Union Minister of State for Information and Broadcasting, without carrying out a techno-economic feasibility study of the project and ascertaining technical capabilities of the private firm.

 These form part of the findings of a statement of fact sent by the office of Principal Accountant General (Economic and Revenue Sector Audit) to the Puducherry government, seeking comments. The Hindu has a copy of relevant portions of the statement titled “Procedural lapses in applying coal blocks resulting in extension of undue favour to private party.”

Political controversy

 Ever since PIPDIC signed the MOU with JRP, the deal has been a subject of political controversy in the Union Territory of Puducherry, which is situated thousands of miles from coalmine fields of the country and with no major power plants. But the agreement has gained greater curiosity with the availability of more information.

 Information gathered by this reporter revealed that it was at the instance of the private firm that PIPDIC, in January 2007, opted to seek allotment of coal block equivalent to 530 million tonnes under the Government Dispensation route [through which identified blocks are allotted to Central/State Public Sector Undertakings or Enterprises]. When the firm had made the unsolicited offer, there were 748 applications of private parties lying with the Screening Committee, an inter-ministerial, inter-governmental body to give coal blocks to such parties.

 As part of its offer, JRP would carry out, at its cost, the entire work from prospecting to mine development.

 By agreeing to it, even before detailed exploration, PIPDIC had to give up its opportunity to avail of more competitive options with regard to mining, coal supply and setting up of power plants.

 When the Coal Ministry gave its in-principle consent to PIPIDC for 250 MT of coal block in July 2007, it had also given a similar allotment in favour of Gujarat Mineral Development Corporation (GMDC).

 There was a specific stipulation that mining of the coal block be carried out either jointly by PIPDIC and GMDC or by forming a separate government company for the purpose. Three months later, PIPDIC signed another pact with JRP for coal supply.

 As part of JRP’s offer, PIPDIC had to sell the entire extracted coal to the projects nominated by JRP and in return, would be entitled to receive a minimum of Rs 25 per tonne, which was later increased to Rs 30 per tonne for 30 years.

 This was far less when compared to GMDC’s agreement with a private firm for the Morga-11 coal minefield in Chattisgarh, which ranged between Rs 70 and Rs 140 per tonne, according to audit scrutiny of the deal.

 Sensing that the deal was not on a strong wicket, as early as in September 2008, the then Lieutenant Governor Govind Singh Gurjar wrote to the government suggesting a review of the agreement with JRP, a recommendation that PIPDIC chose not to take. Since then, the Opposition All India Anna Dravida Munntera Kazhagam had been demanding a CBI enquiry on the deal.

 The Principal Accountant General’s office has also asked the government agency to explain how it accepted, in April 2008, JRP’s selection of KSK Energy Ventures as the partner without ascertaining the procedure and shareholding.

Reaction

 A top Puducherry government official said the observations made by the Principal Account General’s Office were based on an initial assessment. “They are not final. We have sent our response to the charges. We have only followed what most of other State governments have done in the coal block matter.”

 In response to a questionnaire sent to Mr Jagathrakshakan via e-mail, the Minister’s personal assistant told The Hindu over the phone from New Delhi that the Minister did not wish to comment further on a matter which he had already clarified.