Standing committee on coal questions inter-ministerial group.

New Delhi: The parliamentary standing committee on allocation of coal fields has questioned the role of an inter-ministerial group (IMG) in bypassing government companies and allocating two coal-to-liquid (CTL) projects to private firms in 2009.

The government allotted blocks for CTL projects proposed by Jindal Synfuels Ltd (JSFL) and Strategic Energy Technology Systems Pvt. Ltd (SETSPL) based on the recommendations of the IMG.

CTL involves converting coal into liquid fuels similar to petrol or diesel and each of these projects entailed an investment of at least $6 billion. JSFL is a unit of Jindal Steel and Power Ltd (JSPL) and SETSPL is a joint venture between a consortium of Tata group companies and South Africa-based Sasol Synfuels International.

The standing committee headed by Lok Sabha member Kalyan Banerjee said: “The Committee have failed to understand as to why two coal blocks for coal to liquid with an estimated explorable reserves of 3,000 million tonnes (mt) were allocated to private companies by ignoring the government companies.”

“The committee feel that the inter-ministerial group (IMG) has not performed its duty honestly. Even though the blocks were cleared by the screening committee, the IMG should have studied the cases and cancelled the blocks allotted by the screening committee,” the report said.

The standing committee recommended that the government scrutinize the allocation of the two projects and apprise it of the technology used by JSFL and SETSPL and the present status of the projects.

“I haven’t looked at it (the report) and wouldn’t be able to give my view on it,” said Kirit S. Parikh, who led the IMG at the time, and was then member, energy, at the Planning Commission.

A SETSPL spokesperson said in an emailed response to Mint queries that it “was allocated a coal block for its coal-to-liquids (CTL) project in a structured process based on predetermined criteria. The joint venture was not meted out any extraordinary treatment by the government for allocation.”

The spokesperson said the allocation was made on criteria including the state of preparedness of projects, net worth of Rs.4,000 crore for their principals, past track record in the execution of CTL projects, installed production capacity for CTL and the technology proposed to be used—whether it had been commercially tested and established.

“Sasol, the joint venture partner in SETSPL, has more than 50 years’ commercial experience in CTL and a well-proven technology,” the spokesperson said.

A Sasol spokesperson said in an emailed response: “It is important to note that all due government procedures were followed and adhered to with the SETSPL procurement of the coal block. A transparent and competitive process was followed, per the stipulations defined by the National Authorities and more than 20 companies applied for the two coal block that we were available for CTL projects in India.”

A JSPL spokesperson said through email that the company hadn’t examined the standing committee report “nor do we have the IMG report recommending Coal Blocks”.

“However, in our view, the Coal Blocks were allotted based on certain criteria, which was duly publicized. The companies duly meeting these criteria were allotted the Coal Blocks. The manner in which the report makes allegations by seeking to discriminate between public and private sector companies is really unfortunate,” the spokesperson added.

Mint reported on 10 September about the government making the 2009 CTL allotments despite Abani Roy, a Left parliamentarian, expressing concerns the previous year to Prime Minister Manmohan Singh about such allocations being made without competitive bidding.

Naveen Jindal, chairman of JSPL and a parliamentarian from the Congress party that leads the ruling United Progressive Alliance government, lobbied for allocation of three coal fields in Orissa to three applicants rather than assigning them to any one company, by writing to Parikh, Mint had reported.

The three coal blocks were Ramchandi Promotional (Orissa), North of Arkhapal-Srirampur (Orissa) and Palasbani. JSFL was eventually allotted the Ramchandi Promotional block and North of Arkhapal-Srirampur field was awarded to SETSPL.

A report released by the Comptroller and Auditor General of India pointed to alleged irregularities in the allocation of coal fields that the government auditor estimated led to notional losses of Rs.1.86 trillion to the exchequer.

Rupesh Sankhe, senior analyst, power and capital goods at Karvy Stock Broking Ltd said, “No one has achieved the milestone or made any significant progress on the blocks. The need of the hour is the appointment of a coal regulator to take a call on these tricky issues.”
The standing committee, in its report, also commented on the Coal Controllers Organisation (CCO), which checks coal quality and has the regulatory authority for granting permission for the opening of mines.

“In this regard, Coal Controller has informed the Committee during evidence that he is the only technical man and that also is a temporary post and the organisation has one Surveyor. Other personnel in the organisation are LDCs (lower division clerks), UDCs (upper division clerks) and promotees,” the report said.

The panel, whose report was presented in Parliament on Tuesday, has called for the cancellation of all coal block allocations as the “procedures for distribution” were “unauthorized”.

“Companies have made commitments to invest upwards of $10 billion in CTL projects. Unlocking India’s coal reserves in the interest of energy security, in whichever end use it be, will be meritorious.

These projects are complex and any facilitation to make them succeed will go a long way in making India build confidence in energy sector investors,” said Deepak Mahurkar, director (oil and gas industry practice) at PricewaterhouseCoopers.

The report’s release follows allegations that law minister Ashwini Kumar had interfered in the Central Bureau of Investigation (CBI) probe into alleged irregularities in coal block allocations.

It also comes in the backdrop of a severe shortage of coal that has stalled many power projects, most of which are fuelled by coal. The power sector is the biggest consumer of coal, absorbing 78% of domestic production.

Coal demand in India is expected to grow from 649mt a year now to 730mt a year in 2016-17, making the country heavily dependent on more expensive, imported coal, given that the projected local availability is only 550mt.

The report favoured coal price pooling, which refers to the averaging out of the price of cheaper domestic coal with that of costlier imports as a means of helping those who have to depend on supplies from overseas.

“The committee feel that the states, wherein coal mines are available, can be asked to use only domestic coal available within the state and the states having coastal areas and also the requisite infrastructure for coal handling, can use certain quantum of imported coal,” the report said.

“This would only be possible if there is a mechanism of pooling of the coal price for domestic coal as well as imported coal. This would help in saving freight charges for transportation of coal.”


Source : livemint.com