The curious case of Moily, Essar, Hindalco and Mahan coal block

Why the UPA is desperate to sidestep the Forest Rights Act, one of its flagship achievements, and why a private company moves court to safeguard a sitting union minister

Jay Mazoomdaar February 23, 2014 10:28:52 IST
The curious case of Moily, Essar, Hindalco and Mahan coal block

On February 12, Essar Energy claimed on its website that it had secured Stage II forest clearance for the Mahan coal block and would sign a lease agreement with Madhya Pradesh before commencing mining operations. This was nine days before the Ministry of Environment and Forests (MoEF) made the decision public on its website on February 21.

Mahan Coal Limited is a 50:50 joint venture of Hindalco (Aditya Birla Group) and Essar Power. It proposes to supply coal from the Mahan block of Singrauli in Madhya Pradesh to fuel two captive power plants being set up by Essar (2x600 MW worth Rs 4,000 crore) and Hindalco (900-MW worth Rs 2,400 crore).

The curious case of Moily Essar Hindalco and Mahan coal block

Why would Essar be in a hurry to announce  mining clearance even before the government made it public?  Getty images

Why would Essar be in a hurry to announce the mining clearance even before the government made it public? Was it anxious to shield the Mahan allocation from the scrutiny of the CBI, the Supreme Court and the government’s Inter-Ministerial Group?

Consider these: On 27 December 2013, the Ministry of Power wrote in response to a preliminary enquiry  filed by the CBI that it did not recommend the 2006 allocation of Mahan coal block to Hindalco. Instead, it claimed to have asked the Ministry of Coal to allocate Mahan to Essar Power.

In fact, after Hindalco’s application was rejected twice – once each by the Ministry of Power and the Madhya Pradesh government -- in 2004, it made a presentation alongside Essar in 2005. Next, then Coal secretary PC Parakh wrote to Madhya Pradesh chief secretary Vijay Singh to reconsider the state’s position and support Hindalco. Eventually, in April 2006, the Mahan coal block was allocated to Essar and Hindalco at 60:40 ratio.

The allocation may well turn out to be legally untenable as rules demand that coal blocks be allocated only on the basis of recommendations made by the state government or the end-user department concerned, in this case the Power Ministry.

The SC on January 8 asked the Centre to cancel the allocation of coal blocks that were yet to receive green clearances. “You have already de-allocated 40 blocks. Why don’t you do it for the 29 blocks of private companies,” asked the court. Mahan was on the list.

When Attorney General GE Vahanvati pointed out that the private companies had already invested about Rs 2 lakh crore, Justice RM Lodha said, “The companies which invested money in blocks without getting clearances took the decision at their own risk. They must suffer consequences no matter how much investment has been made.” Vahanvati sought time for the government to review the matter.

The Inter-Ministerial Group (IMG) will meet, according to the PTI , on 25 February to decide the fate of 10 coal blocks – including Mahan -- that were required to obtain forest clearance. The companies include JSPL, Tata Steel, Essar and Hindalco.

In the run-up to that meeting, the coal ministry asked the MoEF to assess the feasibility of granting forest clearances to these 10 coal blocks. It is unclear yet how many of these 10 blocks Environment Minister Veerappa Moily has hastily green flagged. But Mahan got the nod it desperately needed to escape scrutiny.

Setting the haste aside, why is the clearance for a coal mine that is expected to fire 2100MW of power in this energy-starved country not good news? Because the projected gain from the Mahan coal block does not nearly justify the irreversible loss.

The proposed Mahan mines will rip apart around 1200 hectare of sal forests, destroying the contiguity of one of central India’s best un-fragmented forest zones spread over 20,000 hectares. But, as per the project proponent’s own admission, Mahan’s coal stock will “meet only 16 years of plant requirement against the norm of 30 years”.

“I am not entirely clear,” wrote then environment minister Jairam Ramesh in 2011, “why such a good quality forest area should be broken up for such a partial requirement.”

Indeed, during 2008-2009, the Forest Advisory Committee (FAC) examined the project four times and refused to clear it. In February 2010, a joint exercise by the MoEF and the coal ministry identified Mahan as a “no-go” area for mining.

In July 2011, an FAC sub-committee reported how the project proponents and the state government under-reported the quality of forests at the project site. It also pointed out the serious threat of run-off contamination of the Rihand reservoir if mining was allowed in the catchment area.

By then, Ramesh had surrendered 85% of the areas on his “no-go” list before a GoM headed by then finance minister Pranab Mukherjee. Having invested more than Rs 3,500 crore in the power plants linked to Mahan, both Shashi Ruia and Kumarmangalam Birla mounted pressure on the government by writing frequently to the prime minister or the finance minister and paying visits to Ramesh.

As early as March 2010, replying to a letter forwarded by the prime minister, Ramesh wrote: “Shri Shashi Ruia says that the coal mine should be cleared because 65% of the power plant is ready. I cannot, Sir, agree to this logic. I have repeatedly raised my objection to such fait accompli arguments in cabinet meetings, if you kindly recall.”

Yet, the GoM forced Ramesh’s successor Jayanthi Natarajan to grant stage I forest clearance in September 2012. “Despite reservations against the diversion of the dense forest land expressed strongly by the MoEF at the GoM, and the fact that the entire civil work and construction of the plant is already complete after procurement of environmental clearance — and resulting inter alia in huge exposure to nationalised banks — Forest Clearance may be granted to the Mahan Coal block,” she wrote on the file.

But Mahan Coal was yet to clear the biggest hurdle for stage II clearance. “It must be ensured that there is full FRA compliance,” wrote Natarajan in the same 2012 note. It would be a daunting task because the Mahan Sangharsh Samiti had already built strong resistance in the 11 affected villages.

In March 2013, desperate state officials allegedly forged signatures to manufacture consent from a village council, prompting union Tribal Affairs minister VK Deo to step in and seek intervention by the chief minister and the Governor. “There is a strong nexus between the company and local authorities in the region which is leading to large scale violation of forest rights,” he wrote.

But the lesson from Odisha’s Niyamgiri, where palli sabhas (village council) unanimously shut out Vedanta, was not lost on the government. Deo soon lost his voice and Natarajan was replaced by Moily, who, in complete disregard of the FRA, went about clearing projects. As Mahan’s prospects appeared to dwindle under the CBI and the SC scanner, he granted the stage II forest clearance as yet another fait accompli.

The Mahan Sangharsh Samiti continues its fight on the ground and, buoyed by Niyamgiri’s success, may also seek legal recourse. But before the curtains come down on the much-tainted UPA-2, the cozy Moily-Essar act deserves a footnote here.

In September 2011, then corporate affairs minister Moily asserted that he would not reopen the Essar-Loop cross-shareholding case despite the CBI’s claim that Essar held more than 10% of the shares in Loop Telecom when 2G Spectrum was allocated. “You cannot twist a law according to convenience of somebody,” he fumed.

In October 2013, a livid Moily admonished bureaucrats who sought to terminate the 17-year old contract with Essar to develop Ratna and R-series oilfields. Handing over the project to state-run ONGC, the minister said, would have “damaged investor sentiment”.

Last month, after Greenpeace and the Mahan Sangharsh Samiti protested outside Essar House in Mumbai, the company sued both for defamation, seeking damages of Rs 500 crore and, hold on, an injunction  to prevent Greenpeace from asking for Moily's resignation as environment minister.

Curious, did I say?


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