New Delhi, Oct. 19: The Prime Minister’s Office today chose to publicly defend its decision to allow Kumar Mangalam Birla’s Hindalco a share in a coal block in Odisha, an arrangement that has prompted the CBI to lodge an FIR alleging criminal conspiracy by bureaucrats.
The PMO statement said that Birla had been the first to seek allocation of the coal block for his aluminium project and that the Odisha government, which has the final say in the award of coal leases (with central approval), had strongly pushed Hindalco’s case.
“The Prime Minister is satisfied that the final decision taken in this regard was entirely appropriate and is based on the merits of the case placed before him,” the statement said.
But the PMO took care to deflect possible charges of interfering in the CBI probe.
“No impediment is being placed on the CBI to continue the investigation and seek fresh information…. The investigation on this and other matters must take their normal course under the law,” it said.
The agency’s FIR against former coal secretary P.C. Parakh and Birla says the public sector Neyveli Lignite Corporation has suffered because of a revised government decision that forced it to share the coal block with Hindalco. It alleges the private company was thus favoured by Parakh “and other unknown public servants in criminal conspiracy” at the cost of a PSU.
But the PMO statement said the eventual coal allocations had ensured that both Neyveli Lignite and Hindalco received their full requirements.
The media release sought to give a step-by-step explanation of why “the final decision differed from the earlier recommendation of the screening committee”, which had turned down Hindalco’s application.
According to the release, the Prime Minister had received “a letter dated May 7, 2005” from Birla requesting the allocation of the Talabira II and III coal blocks for Hindalco’s aluminium project in Sambalpur and its 100MW power plant at Hirakud.
“The letter was acknowledged by the Prime Minister who noted on the letter — ‘Please get a report from coal ministry’,” it said.
Birla wrote another letter on June 17 the same year, which too was forwarded to the coal ministry.
In August 2005, the ministry sent its file to the Prime Minister, mentioning that the screening committee had considered the three major contenders for Talabira II and decided to allocate the block to Neyveli Lignite.
The explanation for rejecting Hindalco’s application was that the company had long ago been provided with a coal linkage (promise of coal supply) from the state-run Mahanadi Coalfields but had not used it.
The steering committee also said that Talabira II and III needed to be developed together; else some 30 million tonnes of coal would go waste in the boundary separating the two blocks. It therefore suggested that Neyveli Lignite and Mahanadi (separately allotted Talabira III) be allowed to develop the two blocks jointly.
Birla’s case was that Hindalco had been the first applicant as far back as 1996 and that the earlier coal linkage could not be used as the company had failed to secure a bauxite mine for the aluminium project.
Besides, Birla argued, with coal in short supply, state-run collieries like Mahanadi might not be able to supply coal to Hindalco in accordance with the earlier linkage.
Finally, he mentioned that the Odisha government had favoured the allocation of Talabira II to Hindalco in preference to Neyveli Lignite.
The PMO statement cited how Odisha had argued that the Hindalco project would generate jobs and buttress the state’s economy.
Earlier this week, chief minister Naveen Patnaik had confirmed writing to the Centre and denied any wrongdoing. In 2005, when the letter was written, states were competing with one another to draw investments and no chief minister would have risked charges of dragging their feet on industrialisation.
“While the file was being processed in the PMO, the Prime Minister received a letter dated August 18, 2005, from the chief minister of Odisha on the allotment of Talabira II to Hindalco.… The letter mentioned that aluminium plants should get higher priority over independent power plants as they generate more employment, create more wealth for the country and add to the growth of the manufacturing sector directly,” it said.
After this, the PMO asked the coal ministry to look into the matter again.
The ministry then decided that Talabira II and III should be mined as a single block through a joint venture between Mahanadi, Neyveli Lignite and Hindalco, with the shareholding ratio of 70:15:15.
A fourth contender, the state government-owned Orissa Sponge Iron Ltd, was left out as the Centre felt it could be accommodated from another coal block. Besides, its owner, the Odisha government, had itself “indicated a clear preference for… Hindalco”.
The problem, however, was that if the coal were to be shared according to the shareholding pattern, it would mean Neyveli Lignite would get just 29 per cent of the coal it needed to run its 1,000MW power plant, being put up in Odisha as a joint venture with Mahanadi. Hindalco, on the other hand, would get about 81.5 per cent of the coal it needed for its aluminium plant.
This seems to have been the pivot of the CBI’s misgivings. But the PMO release cited a solution: Neyveli Lignite’s “full requirements” could be met from Mahanadi’s reserves in Talabira III, and Mahanadi would still have enough coal left to sell from the mine.
“This would fully meet the coal requirement of the two CPSUs to set up their power project and protect the interests of the CPSUs,” the release said.
It added that “Talabira II & III combined have reserves of 553 million tonnes” while Neyveli Lignite was seeking “280 million tonnes” and Hindalco, “100 million tonnes”.
A public investment board decided that of the 20 million tonnes to be mined annually from Talabira II and III, some 5.3 million tonnes would be allocated to Neyveli Lignite and 3 million tonnes to Hindalco. Mahanadi would sell the rest to various other state-run power plants.
The Neyveli Lignite power project in Odisha did not eventually take off. The CBI blamed the coal allocation arrangement but a Neyveli Lignite official, speaking to this newspaper on Thursday, cited other factors, such as the conditions set for land allotment.
The PMO release noted that under the country’s laws, a mining lease for coal is granted by the state government with the Centre’s approval.
“Thus, under the federal framework… both the central and state governments need to concur before an allottee can be granted a mining lease. Accordingly, the strong recommendation of the government of Odisha is important and has to be given due consideration.”