Indian Coal Allocation Scam

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The present article deals with the Indian coal allocation scam which took place in India. India is a land blessed with abundant natural resources and has been a point of attraction for various countries due to its resources. In the past, we have been invaded by various traders to get access to our natural resources. Some resources are in demand all over the world and are exported by India as well. However, the resources which were in abundance at one point of time are now becoming scarce.

Coal is a natural resource which is found in various states of India especially in West Bengal which accounts for around 11 per cent of coal deposits in India. There is a procedure established for allocation of coal mine fields to any company which is to be followed. The companies or potential customers aggressively bid for the coalfields and the highest bidder gets allotted. In the Indian Coal Allocation scam, private companies as well as individuals were arbitrarily allotted coal fields.

Coal Allocation Process

Coal as source of energy is non-renewable. It is a flammable, sedimentary organic rock, which is made up of carbon, hydrogen and oxygen. It is shaped from vegetation, which has been solidified between other rock strata and adjusted by the consolidated impacts of heat and pressure over many years.

The development of residue and different dregs get covered as the outside layer in the marshes and peat lowlands, frequently to incredible profundities. With entombment, the plant material gets exposed to high temperatures and weights which cause physical and synthetic changes in the vegetation, resulting into peat and thereby forming into coal. The nature of each coal store is controlled by temperature and pressure and period of its formation called as ‘organic maturity.’

It has been evaluated that there are more than 984 billion tons of coal reserves found around the world, with the greatest holds in the USA, Russia, China and India. This implies there is sufficient coal to last us for more than 190 years.

Ministry of Coal in 2008 affirmed the service to make arrangements to investigate and create coal. Coal India Limited and its subsidiaries, Neyrchi Lignite Corporation are such public companies which exercise the key managerial control of this service. A joint endeavor with the Government of Andhra Pradesh is Singareni Collieries Company Limited in which the Central Government holds 49% value and the balance 51% is held by the Government of Andhra Pradesh is another initiative.

No particular criteria about the allocation of coal blocks were authorized until 1993. Certain changes were made in the Coal Mines (Nationalization) Act, 1973 after which coal mining was permitted. A screening council was formed by the Ministry of Coal to give profitable proposals and suggestions on the allotment of captive coal mining. For privately-owned businesses, the portions of coal blocks were decided through the screening board. Under the Coal Mines (Nationalization) Act, 1973 around 218 coal blocks were allotted, somewhere in the range of year 1993 and 2011 to both public and privately owned businesses.

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Indian Coal Allocation Scam

In short, the Indian coal allocation scam, or ‘Coalgate’ as it is prominently known was a political scam that inundated the UPA government in the year 2012. The scam broke out after the Comptroller and Auditor General of India (the ‘CAG’) blamed the Indian Government for distributing 194 coal blocks to public and private undertakings for use in an inefficient manner between 2004 to 2009.

CAG contented that the exchequer endured an immense misfortune and the public and private organizations delighted in fortune gains because of the approach followed by the Central Government in dispensing the coal blocks. It further stated that the Central Government did not follow the due procedure for bidding and numerous government officials campaigned for allotment to certain private players leading to cohort capitalism. CAG also highlighted the fact that some private players got more coal blocks than required for their daily tasks; and a few organizations sold coal implied for inside use, in the open market. Numerous organizations were additionally observed to be crouching on blocks for quite a long time. The ballpark loss to the exchequer was estimated around Rs.10.6 lakh crore but was finally assessed to the tune of Rs. 1.86 lakh crore.

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The government claimed that the postponement in presenting the bidding procedure was an after effect of coalition governmental issues and that the opposition ruled states restricted the sale procedure. The government contended that it had safeguarded its distribution approach. Prime Minister Manmohan Singh (the ‘PM’) invalidated the CAG’s report and claimed that there was no wrong doing.

A grievance recorded by BJP brought about the CBI starting a test into the supposed defilement in the allotment of coal blocks. The CBI filed around 14 cases against many people including prominent industrialists like Naveen Jindal and his organization JSPL, Kumaramangalam Birla, Congress MP Vijay Darda and his sibling Rajendra Darda, JLD Yavatmal Energy Limited, AMR Iron and Steel Private Limited, Vini Iron and Steel Udyog amongst others. The CAG report likewise brought about the arrangement of an Inter-Ministerial Group (the ‘IMG’) to settle on re-distribution of coal obstructs that were not created on schedule. The IMG prescribed de-allocation of 13 blocks and relinquishment of bank guarantees of 14 allottees including any semblance of Tata Sponge, GVK, Arcelor Mittal, Monnet Ispat and Energy, Adhunik Metaliks and so on. A Standing Committee report had recommended that portion of all coal hinders from 1993 – 2008 was unlawful and initiated the process for dropping out licenses of companies, where creation hadn’t started which resulted in prosecution of both the NDA and the UPA system.

Former Coal Secretary P. C. Parakh who had been charged by the CBI alongside Birla hit out at the PM for overruling his call for sales on allocations of coal blocks. 142 blocks were designated during the PM’s residency as Coal Minister. These claims encouraged the BJP which had over and over requested the PM’s renunciation.

Approximately 157 documents, which were significant evidence for the CBI, disappeared including those containing minutes of screening board of trustees, gatherings, designation records etc. While the coal service alleged it had stored and provided majority of the records to CBI, reports suggested otherwise that 18-20 essential documents were untraceable. Without these records, the investigations were stuck in limbo.

The Screening Committee proposed that inclination be given to the power and steel areas (and to huge ventures inside those segments) and had recommended that the following factors should be considered, before allocating any captive block:

  • status (organize) level of advancement and condition of readiness of the projects;
  • total assets of the potential organization;
  • the output capacity as stated in the application;
  • the recoverable reserve which can be maximum allowed as proposed in the application;
  • date of enabling mine as proposed in the application;
  • the date on which the exploration may be completed (in regard of unexplored blocks only) as proposed in the application;
  • technical involvement (as far as existing limits in coal/lignite mining and indicated end-use);
  • the suggestion of the authoritative ministry concerned;
  • the suggestion of the state government concerned;
  • track record and monetary capacity of the organization.

The CAG prepared a detailed Draft Report of more than 100 pages but was sliced down to a mere 50 page Final Report. A Public Interest Litigation (‘PIL’) was filed in Supreme Court in September 2012. The premise of this PIL was the previously mentioned draft report by CAG. In September 2014, the Supreme Court held the scratching-off of 204 coal blocks out of 218 coal blocks as they amounted to illegal allotment(s) and in its judgment mentioned, inter alia, the following points:

  • Around 194 blocks were assigned to private segment organizations through a vague and arbitrary procedure of private offer.
  • As indicated by CAG, the all-out inexact misfortunes which the Government would bear were anticipated at 10 lakh crores. However the final numbers reflected a loss of 1.86 lakh crores only.
  • CAG report stated that 25 big segments including Tata gathering, Jindal Steel, Laxmi Mittal, Essar Group, Vedanta profited because of ill-advised offering process from 2004 – 2006.
  • A key role was played by the parliamentary standing committee during April 2013 as it invalidated the distribution procedure between 1994 -2009. It had even asked to arrange an examination procedure to investigate the issue and all those organizations which were associated with the scandal.
  • In 2013, CBI made a noteworthy stride by filing FIRs against big industrialists including Naveen Jindal, Desari Narayana Rao, Kumar Manglam and former coal secretary P.C. Parakh. It was said that if the former secretary would be held liable, the former Prime Minister Manmohan Singh could be blamed too.
  • In July 2014, the Supreme Court chose to set up an exceptional CBI court to hear the considerable number of cases relating to allotment of coal. Likewise, during this period, bodies of evidence against former secretary P.C Parakh and the former Prime Minister Manmohan Singh were reclaimed by the CBI.
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On 25th August 2014, the Supreme Court after a lot of examinations pronounced that all coal assignments between 1993 – 2010 were invalidated and were unlawful. The scam quickened the nation’s reliance on imported coal. It further led to the de allocation of the 218 blocks – 100 of which went to Public Service Units (PSUs), 106 to privately owned businesses, 12 to ultra-mega power projects (UMPPs) and to coal-to-liquid activities. Former Attorney General Goolam Vahanvati apprised the apex court that organizations had invested a whooping Rs 2,00,000 crore in their captive blocks.

Out of the 218 blocks – 40 coal blocks were under creation out of which 37 coal blocks were cancelled; 6 coal blocks were in a process to begin creation, of which 5 coal blocks were dropped.


Indian Coal Allocation Scam which came into light in the year 2012 led to the wrongful allocation of coal mining fields to various people. The Government has now established a proper mechanism through which a person or company secures the allocation of the coalfield. All the interested and potential buyers must be given opportunity so that they can bid in an auction for the concerned mine. India is a country which is rich in its natural resources which must be exploited efficiently. The resources if used effectively can provide benefit to both the present and future generations and prove advantageous for the country at large

The legislature has passed The Coal Mines (Special Provisions) Act, 2015 which specifically deals with allocation and provides the general conditions, guidelines and rules relating to the allocation of coalfields in India and also provides for the auction and allocation of mines whose allocation were cancelled by the Supreme Court in 2014.

Recently, the Parliament has also passed The Mineral laws (Amendment) Bill, 2020 (the “Bill”) that proposes to remove end-use restrictions for participating in coal mine auctions and open up the coal sector fully for commercial mining by domestic and global companies. The Bill proposes to amend the Coal Mines (Special Provisions) Act, 2015 and the Mines and Minerals (Development and Regulation) Act, 1957 that currently regulates the overall mining sector in India. Other key features of the Bill aim to remove restrictions on end-use of coal, provide for a composite license for prospecting and mining, allow reallocation after termination of the allocations amongst other things. This is definitely a step forward for a better and a brighter tomorrow.