A special court on Tuesday asked the Central Bureau of Investigation (CBI) to examine ex-Prime Minister Manmohan Singh in a case related to irregularity in allocating a coal block in which Aditya Birla Group Chairman Kumar Mangalam Birlaand former coal secretary P C Parakh were named.In October 2013, when the CBI had registered this case, it triggered a huge controversy as Singh’s role was also questioned by the opposition parties.  Back then, Singh was quick to officially react to the allegations by issuing a press statement from the Prime Minister’s Office (PMO) within a few days of the registering of the case.In his defence, Singh maintained that he 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 case relates to the allocation of Talabira-II and -III coal blocks jointly to Hindalco Industries (an Aditya Birla Group company) and with two other firms in Odisha’s Jharsuguda district in 2005. During this period, Singh was holding additional charge of the coal ministry.Business Standard takes a look at Singh’s version of one of the most controversial coal block allocation.

Merit in the case

Chalking out the sequence of events, Singh said that the Talbaria coal block allocation was a case where “ the final decision differed from the earlier recommendation of the Screening Committee, and this was done following a representation received in the Prime Minister’s Office from one of the parties, which was referred to the Ministry of Coal.”

Screening Committee’s first rejection

According to Singh, initially Birla (then non-executive chairman of Hindalco) had written to him (letter dated 7 May 2005) for allotment of Talabira II coal block in Odisha to Hindalco. Acknowledging the letter, Singh asked Birla to get a report from the coal ministry. Birla wrote another letter in June 2005 “repeating the request”, also writing to the coal ministry to send the report on the matter.

In August 2005, the Ministry of Coal had replied to the PMO saying that the Screening Committee, headed by Parakh, had recommended that the Talabira coal block be allocated to Neyveli Lignite Corporation (NLC) and not Hindalco as “adequate coal linkages had been provided to Hindalco from Mahanadi Coalfields Ltd. (MCL) a long time back and Hindalco had not used the coal.”

The committee had proposed that “NLC & Mahanadi Coalfields Ltd. can develop the two blocks together as one large mine through a Joint Venture (JV).”

However, Birla’s contention was that his company was the first one to apply for the block in 1996 and “the coal linkage granted earlier was not used as a bauxite mine lease relating to the aluminium plant had not materialized.” In fact, Birla further mentioned that “the Government of Odisha favoured allocation of Talabira-II to Hindalco in preference to NLC.”

Odisha government’s strong support

“While the file was being processed in PMO, the Prime Minister received a letter dated 17 August 2005 from the Chief Minister of Odisha (Naveen Patnaik) on the allotment of Talabira-II to Hindalco,” Singh said in the press statement.


In the letter, Patnaik had said that his government (also part of the standing committee deliberation) had given “topmost priority” to Hindalco and had “strongly supported the case.”

The reasons cited by the Patnaik government were that aluminium plants generate more jobs and create more wealth for the country compared to independent power plants. “The letter urged that these special considerations be kept in mind and the matter examined expeditiously,” the PMO said.

File returned

The PMO, on 29 August 2005, returned the coal ministry’s earlier recommendation of not allocating the coal block to Hindalco and asked the ministry to re-examine the matter in the light of Patnaik’s letter and resubmit the file.

In September 2005, the coal ministry re-submitted its recommendation and this time decided to allocate Talabira II & III as a single mine through a JV formed between Mahanadi Coalfields, NLC & Hindalco with equity shareholding of 70 per cent, 15 per cent and 15 per cent respectively. Accordingly, 70 per cent of the production was decided to be handed over to Mahanadi Coalfields and the rest equally to NLC and Hindalco.

“The satisfaction level of NLC would be 29 per cent of its total requirement and of Hindalco, 81.5 per cent,” the coal ministry had said.

The equity formula

The coal ministry stated the following as one of the reasons for the above recommendations, “NLC may not be dropped as it is a Central PSU already recommended by the Screening Committee. Hindalco’s case for allocation has been strongly recommended by the State Government and it has also been an early applicant.” The ministry re-instated that the Odisha government had clearly preferred Hindalco over others.

It further admitted that as a result of such an arrangement in allocating the coal block, “Hindalco’s satisfaction level is about 80 per cent, whereas NLC’s is much lower” adding further that the full needs of NLC could be met from Mahanadi Coalfields’ reserves in Talabira-III.

According to Singh, while processing the proposal, the PMO had noted that ownership pattern was not in correspondence with the guidelines approved by him in June 2005 which “required this ratio to be in proportion to the assessed requirement of coal of each allocatee. As per this guideline, the NLC:Hindalco ratio in their 30 per cent share should be 22.5:7.5 and not 15:15 as was proposed.”

However, the coal ministry said, “As for the NLC and HINDALCO equity ratio in the JV, it would require relaxation of guidelines that were approved by PM earlier, but this could be considered as NLC and Mahanadi Coalfields Ltd. are sister PSUs and NLC’s requirements of coal could be met from Mahanadi Coalfields Ltd’s 70% share of production. This would fully meet the coal requirement of the two CPSUs to set up their power project and protect the interests of the central PSUs.”

Based on the arguments and the reasoning given by the coal ministry, the Prime Minister had approved the proposal on 1 October 2005.

The summons issued to former Prime Minister Manmohan Singh as an accused in the coal blocks allocation scam is probably a misdirection of the prosecution’s efforts. Not only will it probably go nowhere, but it will effectively shift the focus away from the real scamsters to the man who happened to figuratively head the coal ministry at that time – and who is highly unlikely to have derived any personal or pecuniary benefit from the misallocations.To be sure, the case does have some reason to drag Manmohan Singh’s name into it. For, he did have a direct role to play in changing the coal allocation pattern recommended by the Screening Committee set up for the purpose.The case, which involves the allocation of Talabira-II and Talabira-III coal blocks in Odisha’a Jharsuguda district in 2005, runs something like this: the blocks were originally allocated by the Screening Committee, headed by then Coal Secretary PC Parakh (also an accused in the case, along with Kumar Mangalam Birla of Hindalco), to the public sector Mahanadi Coalfields Ltd and Neyveli Lignite Corporation. But Birla wrote a letter to Manmohan Singh seeking his intervention. Singh directed him back to the coal ministry.

The coal ministry, which too was headed by Manmohan Singh, initially said that Hindalco already had coal available from Mahanadi Coalfields which it had not used. Birla then wrote a second letter to the PMO explaining that the old coal linkage had not been used because a “bauxite mine lease relating to the aluminium plant had not materialised.” Birla also said that his request for Talabira-II had the backing of the Odisha Chief Minister, Naveen Patnaik.

It was after such to-ing-and-fro-ing that the PM gave his okay to changing the allocation pattern, and even this was not about favouring only Birla. The final allocation pattern was 70 percent to Mahanadi Coalfields, and 15 percent each to Neyveli and Hindalco in a joint venture that included both Talabira-I and Talabira-II. In this new arrangement, Neyveli did get short-changed, for it would get only around 29 percent of its requirements, and Hindalco over 80 percent. To remedy this, it was agreed that Neyveli could be given more coal from another block, Talabira-III.

Now, it is always possible to interpret Manmohan Singh’s intervention as an attempt to favour Birla, but the problem is that one can never know. The political authorities have to constantly take such decisions keeping the larger interests of the country in mind, including public sector and private interests.

The problem with summoning Manmohan Singh to appear in person at the CBI court in April is that it will be seen as needless political harassment. Singh has already given his version of events to the CBI when the agency queried him this January, and calling him to court to make the same statement is hardly going to give the case new legs.

The downside of dragging Manmohan Singh into the case physically is this: it will shift focus from the real crooks who may have made money in the coal block allocations to the politician under whose watch it happened. This is not likely to lead anywhere. The real case the CBI has to chase is who made the money – but that is not in sight.

In the Hindalco case, the Odisha CM clearly backed Birla vocally through a letter supporting the allocation, and all Manmohan Singh has to say in court is that in a federal set-up he has to respect the wishes of states as well.

The case against Manmohan Singh, or for that matter Naveen Patnaik, if he too is dragged in, will fail unless the CBI can prove mala fide intent in the final decision.

To prove this, they will have to show that either Singh or Patnaik (or even people close to them) had something personal to gain from changing the allocation to help Birla. The same has to be proved against Parakh and Kumar Birla, too – which is unlikely to happen.

What Manmohan Singh can be blamed for are three things.

First, he presided over an opaque process which enabled someone to make money from wayward coal block allocations.

Second, he failed to shift the process towards the transparency of auctions even though he once favoured it. Who, or what, forced him to change his mind will tell us who may have benefited from this. It is more than likely that Congress and state-level regional politicians will have been responsible for this, but there is no proof as of now.

Third, as PM, Manmohan Singh is ultimately responsible – politically – for what went wrong in his administration. His party may have paid a price for this in the recent elections.

However, unlike the 2G spectrum scam, where A Raja was clearly seen as the man behind the machinations to favour a few, in the coal block scam, one can spot only political failures, but no smoking gun leading to the real crooks.

This shows that the CBI is on the wrong trail. Manmohan Singh isn’t the one to chase; he may know who should be chased, but probably won’t tell. The questions to ask are (1) who, or what, made him change his mind on coal auctions, and (2) who may have got paid in each separate coal block allocation. On this, there is no progress whatsoever. The case in court won’t fly for lack of legal evidence.

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