Coal Scam Simplified

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So here CAG (Comptroller Auditor General of India) is again in news with a report of coal block allocation, causing an estimated loss of 1.8 lakh crore rupees to public exchequer. As expected opposition parties (BJP and allies) has stalled almost complete monsoon session of parliament on the demand of resignation of our mute PM who was head of coal ministry for 4 out of 6 years. Meanwhile ruling party has completely denied any wrongdoing and questioned the conduct of CAG itself. Whats ironical here is the way UPA expects from others to respect Parliament citing it a constitutional body but at the same time, questions another constitutional body CAG and their motives.

Amidst all this accusations and counter-accusations, no one is actually looking into the root of such a big scam. Was this genuine policy failure, or was it a fine example of nepotism and crony capitalism?? I would be taking you through this Great Indian Coal Saga (though briefly). First of all we should understand why Coal is so precious for India?

Photo Credit: Bert Kaufmann via cc

Importance of Coal for India: In this time of new technology and methods of power generation, why India is still worrying for its coal? Here are few reasons:

→ 55% of India’s power generation is done using non-coking coal whereas for rest of the world this % lies somewhere around 30-40%.

→ Power generation companies in India uses non-coking coal.

→ Steel & Iron industry and cement industry uses coking coal as a fuel.

India companies (both public and private sector) in present does not mine enough coal to meet the demands, so India imports both coking and non-coking coal to meet the demands. Now the question is why Indian companies could not mine enough coal even though we have 3rd largest coal reserves in the world??

To understand it, we will have to understand about coal mining in India since independence and acts which deals with same.

Coal Mining in India post Independence: Most of the Indian coal reserves were in private hands post independence. During 1st five year development plan, government felt needs of more coal. To deal with shortage of coal, govt came up with a piece of legislation in 1973 which is known as coal mines nationalization act 1973. This act is principal act for coal mining in India.

→ With coal mines nationalization act, all the coal reserves were declared national assets. This act also defines guidelines for mining and labors working in minings.

→ Coal India Limited was formed in 1973, with sole rights of coal mining in India.

→ Coal nationalization started from 1971:
a) first coking coal mines were nationalized from 1971-72.
b) then non-coking mines were nationalized in 1973.

→ In year 1976, amendment was done in principal act which allows:
a) With this amendment, CIL can allocate coal block for steel and iron manufacturing companies for their captive mining.
b) Some small pockets of coal (which does not require forest permission, rail transportation and other things) could be allocated to companies for mining.

→ In Year 1993, one more amendment was passed to allow:
a) Companies involved in power generation to do captive mining(restricted to ).
b) Companies to wash coal at pithead of mine.

→ In Year 1996, again one amendment was done to allow:
a) Captive mining for companies involved in cement production.

→ In year 2000, again one amendment was done with the bill, which removes the restriction of captive mining from coal mining. That means any company in the country can mine the for own consumption, sale or for any other purpose accordance with the license.

This was the history of coal mines nationalization act 1973. All these amendment were done to allow private companies to do mining as CIL and its subsidiary can not meet the mining demand. These amendments eventually became root cause for the coal scam.

Written by Tathagat Khandelwal >>

I'm a common man who keeps an eye on the political affairs. I support a complete overhaul in the Indian political system to make any long lasting change possible.

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Indian Exponent: Coal Scam Simplified
Coal Scam Simplified
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