A Tata Coalgate? 999-yr mine lease at 25p a bigha!

A new Coalgate controversy, this times involving captive mines allotted to the Tatas before independence, is taking shape.

For a meagre annual rent of around Rs 3,250, Tata Steel has a 999-year lease on a captive coal mine in Jharkhand's Ramgarh district, but the company is allegedly using a part of this coal for commercial sales. The company is also alleged to have avoided royalty payments, but has since agreed to pay up.

The coal mine, spread over a surface area of 13,007 bighas, was given to Tata Steel at a surface rent of 25 paise a bigha (Rs 3,251.75 per annum) in 1946, but even after the Mines and Minerals (Development and Regulation Act) came into force in 1957, the 999-year lease was continued. The understanding was that the coal would be used only for captive purposes for producing iron and steel.

 A Tata Coalgate? 999-yr mine lease at 25p a bigha!

Another coal scam? Getty Images

But records with the Jharkhand government seem to suggest that Tata Steel has, in some instances, used 55 percent of the coal produced from this "captive" coal mine for sales in the open market.

Tata Steel's website says Raja Bahadur Kamakhya Narayan Singh had granted this 999-year lease dated 21 November 1946 through an indenture. However, under the MMDR Act, even leases granted before independence are subject to a 30-year limit.

Firstpost learns that the Central government has kept this lease "pending modification" under the Coal Mines Nationalisation Act, which came later.

State government documents accessed by Firstpost show that the Joint Secretary (Home) received a confidential letter dated 5 February 2009 from the deputy commissioner of Ramgarh which indicated that Tata Steel was selling coal to outside parties from its captive coal mine in West Bokaro Division. "On an average only 45 percent of coal extracted is utilised captively. The rest is sold to outside parties," reads the confidential letter.

The deputy commissioner said: "It may not be out of place to mention that the company (Tata Steel) holds the lease for a period of 999 years, which seems ridiculous because as per Section 8 of MMDR Act, 1957, (the) maximum period of mining lease shall not exceed 30 years. Not only that, the surface rent paid by the company is only 25 paise per bigha which also seems to be very, very low. These two point need serious rethink from the state government."

The 2009 letter of the deputy commissioner also alleged evasion of royalty by Tata Steel on this captive coal mine, causing a loss of Rs 75 crore to the state exchequer. The letter claims that Tata Steel finally fell in line and started paying royalty according to rules.

Under the MMDR Act, Tata Steel is supposed to pay royalty on the quantity of coal removed or consumed from the leased area. But actually the company was paying the royalty on the production of coal in the leased area.

"It is mandatory under rule 51 of the Mineral Concession Rules, 1960, to furnish the detailed description of coal extracted, stocked, dispatched or removed and consumed from the leased area to the concerned district mining officer. Despite repeated reminders, the company (Tata Steel) didn't comply with the rules," the confidential letter reads.

And when threatened with recourse to the law, "the company started submitting the correct royalty. The state government is also likely to get approximately Rs 75 crore as royalty, which has accrued from August 2002 to October 2008", the letter adds.

When asked, Tata Steel did not respond to the charge of selling coal in the open market despite its status as a captive mine. The company also did not answer specific queries from Firstpostabout the state bureaucrat's charges of alleged misuse of this captive mine.

To other questions, a Tata Steel spokesperson said: "Our lease is valid as per Jharkhand High Court Division Bench judgement dated 29 June 2005. It is a captive coal mine and is being used for the same purpose. Royalty is being paid as per the rates notified in the MMDR Act."

During Arjun Munda's tenure as chief minister of Jharkhand, several show cause notices were sent to Tata Steel, which finds mention in the Comptroller and Auditor General's (CAG's) list of 57 companies who benefited from the Coalgate scam.

But the 999-year lease deal with Tata Steel is a separate controversy that is not part of the CAG report.

Updated Date: Dec 20, 2014 13:04:58 IST