Et tu, Naveen? Coalgate noose tightens around Odisha CM

By Sandeep Sahu

Bhubaneswar: The 'coalgate' noose appears to be tightening around the neck of the Naveen Patnaik government in Odisha. As skeleton after skeleton comes tumbling out of the cupboard, the Patnaik-led BJD government is finding it tough to justify many of the recommendations it had made for coal block allocation to private companies.

When Union Minister Srikant Jena produced a 2002 letter written by the chief minister to the then coal minister Ravi Shankar Prasad recommending the allocation of the Utkal 'B' coal block in the Talcher coalfields, already allocated to a Tamil Nadu-based company called Talcher Mining Pvt Ltd in 1998, in favour of Jindal Steel and Power Limited (JSPL), the government sought to explain away the move saying the recommendation was entirely in line with the state government’s policy of ‘value addition’ of raw material inside the state.

Odisha, Chief Minister, Naveen Patnaik. Image courtesy PIB

But what the Naveen government had sought to hide was that it was yet to sign a memorandum of understanding (MoU) with JSPL, which would have justified its claim of value addition, when it made the recommendation in 2002. It claim of ‘value addition’ fell flat on its face when it was revealed that it had recommended two more coal blocks—one each to the JSPL and Tatas—without any MoU with either of the companies. In fact, the majority of the 42 companies recommended (of which 26 were accepted by the coal ministry) for coal block allocation had not signed any MoU with the government for setting up industries in the state.

But even the fig leaf of 'value addition' is not available in the case of the government's decision to enter into a highly suspicious joint venture agreement with the Delhi-based Sainik Mining Allied Services Ltd (SMASL) in 2003 for the development of the Utkal 'D' coal block in the Talcher coalfields in the coal rich Angul district. But with the Central Bureau of Investigation (CBI) now breathing down its neck, the Odisha government hurriedly announced the cancellation of the highly suspicious joint venture agreement it had signed with SMASL.

Nobody knows when exactly the termination came. But it can be safely assumed that the decision was taken after the CBI, as per the orders of the Central Vigilance Commission (CVC), expanded the scope of its probe to include all coal block allocations since 1993. Significantly, the state government was sitting on a show cause notice served by the Union ministry of coal in 2010, which had pointed out that the joint venture deal, which gave Sainik Mining 74% of equity, was in clear violation of the Coal Mines (Nationalisation) Act, 1973 which stipulated that PSUs, while entering into a joint venture with a private entity, must ensure that they hold at least 51% of equity.

In sharp contrast to its indifference to this central directive, the Naveen government had acted with unusual alacrity after it got the coal block. Barely ten days after being allocated the coal block with coal reserves of 145 metric tonnes (MTs), the state-owned Odisha Mining Corporation (OMC) had signed a dubious JV agreement with SMASL on 29 December 2003 that gave 74% of stakes to the Delhi based company.

OMC now justifies the JV agreement on the grounds of its 'poor' financial condition at the time it went for the JV arrangement. "We had to take loans from banks even to pay salaries to our staff," OMC chairman-cum-managing director (CMD) Saswat Mishra said on Monday. But with things having improved since then, “OMC now has the required funds to take up coal mining activities on its own", he said. Asked why it had not acted for so long on the Centre’s directive to increase OMC’s share to 51% as required, he could not come out with any convincing answers.

The BJD government is already in a spot with the CBI having registered an FIR against Navbharat Power Pvt. Ltd for fraudulently selling off the Rampia and Dipside coal blocks it had been allocated in January 2008 for setting up a thermal power plant to Essar Power. How Navbharat, promoted by Hyderabad based industrialist P Trivikram Prasad and ex-CEO of Lanco Y Harish Chandra Prasad, got these two coal blocks with a whopping 112 MTs of coal in the first place is a big mystery.

The state government had clearly glossed over the dubious credentials of the company, which had grossly inflated its net worth by producing short-term MoUs with two foreign companies, while signing a MoU with it in June 2006 to set up a power plant in the state. But the bigger mystery is how the government shut its eyes even as the company sold 100% of its stake to Essar for a windfall gain of Rs 230 crore in clear and blatant violation of the terms of the MoU as well as Central rules governing coal block allocation. While Steel and Mines Minister Rajanikanta Singh has said the company "seems to have violated the agreement" and has promised action against it, Essar has claimed that the sale was "fully disclosed to all the relevant authorities".

With coal block allocation to a host of companies including Shyam DRI, Bhushan Steel, Mahavir Ferro, Rungta Mines, Visa Steel Ltd, Adhunik Metaliks and Deepak Steel Ltd now under the CBI scanner, the last has clearly not been heard on the Odisha leg of the coal scam.

Updated Date: Oct 03, 2012 17:31 PM

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