Coal Block Allocation: Govt Ignored State Entities in Favour of Pvt Firms With ‘Questionable’ Backgrounds, Alleges EAS Sarma
Newsclick Report
[EAS Sarma, former secretary to the Government of India, has questioned the Centre’s preferential treatment towards private companies while ignoring state entities. This happened, as per Sarma, even when the private companies were under investigation by Central investigative agencies like the Central Bureau of Investigation (CBI).
One of these companies under investigation is Bhushan Steel Limited (BSL), whose locations were raided by the Enforcement Directorate (ED) in connection with a bank fraud of Rs 56,000 crore. While the raids are recent, the RBI identified the company as a ‘bad loan’ entity as early as June 2017. Despite that, two highly valuable iron ore blocks were issued to BSL in Odisha.
While the Ministries of Mines & Steel have allotted valuable iron ore mines to private companies with questionable backgrounds, the same two Ministries have been “extraordinarily obstinate in the matter of allotment of one single captive iron ore block to Rashtriya Ispat Nigam Ltd (RINL), a CPSE, a stance that has eroded the finances of RINL over the years.” Such was the situation that the RINL had to take financial assistance of Rs 900 crore from the Jindal Group. The Finance Ministry did not provide RINL with liquidity support.
In his letter to cabinet secretary Rajib Gauba, Sarma has requested “the CBI and the ED to investigate the allotment of iron ore blocks to BSL.”]
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Full text of the letter
To
Shri Rajiv Gauba
Cabinet Secretary
Govt of India
Dear Shri Gaubas,
I refer to a press release from the Enforcement Directorate that the “Directorate of Enforcement (ED) has conducted search and survey operations on 13.10.2023 at 30 locations in Delhi NCR, Haryana, Kolkata, Mumbai and Bhubaneswar, as part of investigation under PMLA, 2002 against the Promoters of M/s Bhushan Steel Limited (BSL) in connection with a Bank fraud of Rs 56,000 crore”. The Enforcement Directorate, vide its Press Release dated 16-10-2023 corroborated this. By any stretch of the imagination, the amount covered by this alleged fraud is huge!
The Central investigation agencies should go all out to investigate this fraud and bring all those responsible to book.
What perplexes me is that, according to old news reports, the RBI identified BSL as a “bad loan” company as early as June 2017. The Central investigating agencies would have initiated investigations against the company much earlier.
Still, according to a letter dated 24-6-2017 from the Odisha Govt/ Ministry of Mines (copy enclosed), it is clear that an e-auction of Kalamang (West) iron ore block in Bonai & Barbil Tehsils in Sundergarh & Keonjhar districts was conducted on 18-5-2017 and a letter of intent was issued to BSL on 24-6-2017. In another similar auction, the Netrabandha Pahar iron ore block in Baladih, Koira Tehsil, Sundargarh district in Odisha was also allotted to the same company, BSL on 19-5-2017.
How did the Ministries of Mines and Steel allot such valuable iron ore blocks to a company whose alleged involvement in a PSU bank fraud was actively under investigation? How did those Ministries allow BSL, in the first instance, to bid in auctions without checking the background with the other wings of the government, including the RBI and the ED?
The two iron ore blocks taken together contain 174 million tonnes of ore, and their potential value at prices prevailing in the global market would be around USD 17 billion. To hand over such a valuable resource to a company that defrauded PSU banks is beyond any explanation.
The Kalamang (West) and Netrabandha Pahar iron ore blocks are in the Sundargarh and Keonjhar districts of Odisha, located in areas notified under the Fifth Schedule to the Constitution were two important Central laws, namely, the Panchayats (Extension to the Scheduled Areas) Act [PESA] and the Forest Rights Act (FRA) are applicable. Those laws make it mandatory for the authorities to hold prior consultation with the local tribal Gram Sabhas before proceeding to auction the blocks. This position was confirmed by the apex court of India in their judgement dated 1-7-2013 in the well-known Vedanta bauxite mining case of Odisha.
Apparently, neither the Odisha government nor the Union Mines Ministry cared to fulfil such an important mandate while subjecting these two iron ore blocks to auction. This speaks volumes of the shoddy manner in which valuable iron ore and other mineral blocks are being auctioned.
While the Ministries of Mines & Steel have been overenthusiastic in allotting valuable iron ore mines to private companies with questionable background, the same two Ministries have been extraordinarily obstinate in the matter of allotment of one single captive iron ore block to Rashtriya Ispat Nigam Ltd (RINL), a CPSE, a stance that has eroded the finances of RINL over the years, weakening it in terms of its perceived value at a time when the Dept of Investment and Public Asset Management (DIPAM) is in an undue hurry to privatise RINL, along with its prime land of around 20,000 acres, its valuable machinery and thousands of its highly talented employees, in the process, violating the provisions of the earlier land acquisition law under which lands were acquired decades ago for a “public purpose”, a term defined to imply an undertaking wholly owned by the government. DIPAM and the Ministry of Steel seem to be deliberately weakening RINL by refusing to provide it a captive iron ore, to enable them to sell the CPSE to a chosen private bidder, to whom the two Ministries have separately allotted captive iron ore blocks, so that RINL may be sold to that private company at an unconscionably low price.
The impression that the Centre is resorting to every means to weaken RINL to be able to hand it over to a chosen private group for a song has gained further strength when RINL, with two senior officers of the Ministry of Steel sitting on its Board, chose to sign an MOU with Jindal, a private steel company, to outsource its third blast furnace unit for revival in return for financial assistance to the extent of a mere Rs 900 crore, which is a pittance compared to what the Ministry of Finance could have given to RINL as a working capital loan to tide over the situation. This is particularly significant as the same Finance Ministry has had no hesitation whatsoever in providing a mind-boggling amount of Rs 2,00,000 crore over a 5-year timeframe by way of open-ended subsidies to profit-earning private companies under the so-called “Production-Linked Incentive (PLI)” scheme. Apparently, the Centre is more than willing to subsidise private companies but not willing at all to help a valuable CPSE like RINL when it needs it.
I request the Centre to ask the CBI and the other investigating agencies to examine the impropriety encompassing the entire chain of events, starting with the Centre’s outright refusal to allot a captive iron ore mine to RINL, allotment of two highly valuable iron ore blocks to BSL knowing well that the company had been under an investigation for huge bank fraud and forcing RINL to go with a begging bowl to the Jindal Group for meagre financial assistance of Rs 900 Crores in exchange for reviving its blast furnace unit when other CPSEs in the steel sector could have provided technical help and the Finance Ministry could have provided liquidity support to RINL.
I have already requested the CBI and the ED to investigate the allotment of iron ore blocks to BSL but the Centre needs to give its nod to those investigating agencies conducting an investigation covering all the cases cited above in a holistic manner.
Para 4.14.4 of the National Steel Policy of 2017(NSP17) states, “The CPSEs will also be encouraged to take a leadership role in the development of the steel industry”. The stance adopted by the Central government towards RINL runs totally counter to the spirit of the NSP2017.
I hope that you will ensure that an investigation on the above lines is taken up the investigating agencies without being influenced by external factors.
Regards,
Yours sincerely,
E A S Sarma
Former Secretary to the Government of India
Visakhapatnam
(Letter courtesy: Newsclick.)
Adani’s Alleged Irregularities on Import of Coal Again Under the Scanner
The Wire Staff
Reuters has cited court papers to report that Adani Enterprises and its subsidiaries “have successfully mounted repeated legal challenges in India and Singapore to block the documents’ release”, referring to documents which would detail the true nature and value of Adani’s coal imports to India.
The Adani Group has been under the scanner and then again in sharp focus since the Hindenburg Research report in January referred to alleged irregularities in coal imports. A detailed investigation by the London-based Financial Times, “for alleged overvaluation of coal imports” last month, connected alleged over-valuation of coal imports to inflated fuel prices and increased rates for electricity consumers may have paid.
In an October 9 legal filing, which Reuters has reported on Friday (November 17), the Directorate of Revenue Intelligence, India’s revenue intelligence agency, has “asked India’s Supreme Court to quash a previous lower court order that allowed Adani to block authorities from collecting evidence from Singapore.” DRI says “the company [has] thwarted [the move to share documents with authorities] for years, as per the news agency.
Adani has denied wrongdoing, and told Reuters it had “fully cooperated” with the authorities by providing details and documents sought more than four years ago and that “no deficiency or objection” was communicated by investigators thereafter.
Reuters says that ahead of India’s 2024 election, political opponents have increased pressure on Prime Minister Narendra Modi’s administration, accusing it of favouritism toward Adani in government decisions.
“Modi and Adani, who both hail from Gujarat, have denied impropriety,” writes Reuters.
Over-invoicing Imports = Consumers Overpaying for Electricity?
The Financial Times reported last month, according to data obtained from customs records, that the Adani Group, “appears to have imported billions of dollars of coal at prices well above market value.”
It said that the “data supports longstanding allegations that Adani, the country’s largest private coal importer, has been inflating fuel costs and led millions of Indian consumers and businesses to overpay for electricity.”
The London-based broadsheet examined data between 2019 and 2021, and concluded that “Adani used offshore intermediaries in Taiwan, Dubai and Singapore to import $5 billion-worth of coal at prices that were at times more than double the market price.” It cited journeys of coal, during which the price of coal, “unaccountably increased by over $70 million.”
The news report again drew attention to the coal imports over-pricing allegations which had been dogging the Adanis despite denials. The Opposition Congress party alleged that the Adani group “may be behind the biggest scam modern India has seen.” They cited the fresh revelations, reported The Hindu, to indicate that “more than Rs 12,000 crore may have been siphoned out of the country in two years.”
Congress general secretary Jairam Ramesh claimed that this was “not a metaphorical loot but literally theft” from the pockets of crores of Indians. He said the latest revelations in the Financial Times, that examined 30 Adani coal shipments between 2019 and 2021 amounting to 3.1 million tonnes, found a 52% profit even on a low margin business like coal trading.
Gujarat Police ‘summons’ journalists reporting on Adani’s alleged coal irregularities
The BJP has consistently denied charges that there is any personal friendship or connection between Prime Minister Modi and his government’s policies that have allowed Adani to grow at the fastest pace any conglomerate has in recent times and managed to control large infrastructure projects in India. But Gujarat police’s enthusiasm in trying to ‘summon’ journalists who are reporting on allegations of impropriety in how the Adani Group functions have only added grist to the mill.
It took the Supreme Court of India on Friday (November 10) to grant “interim protection from coercive action to two journalists from the Financial Times, Benjamin Nicholas Brooke Parkin and Chloe Nina Cornish, who have been summoned by the Gujarat Police in relation to an article published in August against the Adani group.”
Earlier, the Supreme Court had to grant interim protection to two other journalists Ravi Nair and Anand Mangnale in connection with an investigation by them on the Adani-Hindenburg row.
The case of an Opposition Member of Parliament, Mahua Moitra, has already drawn attention to how Parliamentary procedures, rules and propriety may have been stretched and often violated in the functioning of the Ethics Committee looking into the matter of how she asked questions in Parliament. Moitra and her colleagues across Opposition parties in the Committee say she is being targeted as she raises uncomfortable questions about India’s biggest infrastructure conglomerate, the Adani Group, on the floor of the House which becomes hard to shut down.
About 120 eminent citizens have also linked the contentious recommendation of expulsion of Mahua Moitra from the Lok Sabha as being “against public interest.” They also said that the Modi government’s response to the allegations against the Adani Group shows a nexus between “the political executive and big businesses”.
India is among the top ten countries in crony capitalist rankings, as per The Economist. The World Press Freedom Index has placed India at rank 161 out of 180 countries in May, 2023.
(Courtesy: The Wire.)
