Coal hypocrisy PDF Print E-mail
Saturday, 07 July 2012 00:00
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It takes 3 months to act on power profiteers

It speaks volumes for how concerned the government is about the coal scam that the CAG estimated at R10.7 lakh crore that it has taken around three months to act on even the most blatant abuse of the coal allocation process. Power producers such as Jindal Power were producing power at around R1.5-2 a unit thanks to their captive coal but selling it in the merchant power market for 2-3 times the amount, effectively earning a return on equity of over 100% in most years. Which is why, after the leaked CAG report came out, the power ministry issued a letter in April asking for a directive preventing power plants with captive coal blocks from selling electricity in the merchant power market. It has taken the coal ministry nearly 3 months to react to this—“If any developer does not participate in competitive bidding for power supply, the block will be de-allocated,” reads the ministry’s notice to these power producers.

Even more scandalous, as the CAG report pointed out (http://goo.gl/9Lf4p), despite the PMO being in favour of auctions way back in June 2004, it still took 74 months to get over the coal ministry’s objections to this and to get the mining act (MMDR Act) amended to allow for this—yet, no auctions took place even after this. And if the government decided to go in for allocating captive coal blocks instead of auctioning them ostensibly on grounds this would lower costs of coal and hence electricity for the consumer, the coal ministry did a fine job of ensuring this never happened. As FE reported on June 3, the coal ministry made no apparent effort to examine the credentials of those getting the captive coal blocks. In the case of Jindal Power, the saving grace is that it had a power plant and produced power from the captive coal; a host of nondescript firms simply traded in their coal blocks at the earliest. Though this was happening under its nose, the coal ministry chose not to act for reasons best known to it.


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