The NDA government started the re-allocation of coal mines through “transparent” e-auctions, post the Supreme court cancellation of all the old allocations in August 2014.
This has been a futile exercise in achieving the objective of increased coal production. Today most of the southern coal powered thermal plants are starved of critical regular supplies of coal for its thermal power plants.
However, it has been another successful experiment in crony capitalism. The main beneficiary of the new allocations has been the private sector Adani group, having got six blocks consisting of four mines. The group earned 18.6 billion rupees in FY18 from the coal mines.
The façade of transparency is a misnomer. The MDO (Mining Development and Operation) contracts are protected by a government legislated impregnable veil of secrecy.
The original contention of the NDA government, which led to the supreme court canceling the 204 coal block allotments, was that it was an illegal backdoor entry for private players. But today the same has been achieved through MDO contracts between private parties and the PSUs. Also, the allotment to the PSUs is completely at the discretion of the NDA government. The decision to allot coal block to a state PSU could be influenced by the identity of the potential private party having the probability to be the final beneficiary. Hence what has been in actual practice done is a more robust process operable under government sponsorship yet insulated from public scrutiny. The PSU is enabled a seemingly transparent selection process of private parties to enter coal mining, protected from public scrutiny and legal recourse.
Old wine in a new bottle
The government followed a convoluted route through the legitimate legislative process to undermine the very principles that it had claimed to protect. The government first issued an ordinance and later passed the coal mines (special provisions) act through the parliament allowing both – auctions and direct allocations to PSUs. This stealthily empowered PSUs (none having any expertise or resources to undertake this activity) to pass on the mining through MDOs contracts to preferred parties.
It purposely also further diluted the procedures to give itself arbitrary discretionary powers to allocate blocks to central PSUs in “public interest”. It also diluted start-up-time from 44 months to 66 months. Annual production Targets to be achieved has also been brought down to 80% in the first five years.
Today the government has dubiously pushed the MDOs into the twilight zone between direct government allocation and a commercial transaction between the state PSU and a private entity. It has thrown around itself a shield of legal protection and political safety by legislation. The government has barricaded itself by keeping all MDO details outside the preview of RTI. A complete walled governance fortress structure has been built.
The results of this devious strategy can be seen with our uncontrolled rising coal import bills. The consequent national productivity, foreign exchange loss, and higher power costs is another tragic story.
Desperate Search for entry to south India
The government has recently passed legislation on the exclusive canalisation for rare earth minerals. The entire industry had already been completely shut down by the government on false pretexts of export of strategic monazite. The industry was fighting the illegality of the government actions and reeling under foisted cases by other government departments. The central government put the final nail into the coffin. Sheer political contingencies are playing havoc in what should have been essentially pure economic activity.
There is strong belief that the government would follow a similar route to benefit selective corny capitalists of their choice in the southern states of Andhra Pradesh, Kerala and Tamil Nadu where the beach sand mineral industry is concentrated. The three crucial states carry very heavy electoral stakes for the NDA’s reelection strategy. The effort to go all out before the general elections in 2019, seems rent less.