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Part 1: Advantage Adani: Power Industry Lobbies, Coal Ministry Unlocks Dense Forests for Mining

The Union Coal Ministry defied the Environment Ministry to open up the country’s densest forest areas for mining after lobbying by an industry group of the top private power sector companies, reveal records accessed by The Reporters’ Collective.

The Association of Power Producers wrote to the coal ministry in November 2021 to open up for auctions two coal blocks nestled in one of India’s densest forests to address the rumoured coal shortage in the country. But the lobbying was poised to benefit its member, the Adani Group.

One of the two blocks the Association lobbied for is situated in Madhya Pradesh’s Singrauli coalfields and is close to a thermal power plant the Adani Group acquired in March 2022. The other, situated in Chhattisgarh’s pristine Hasdeo Arand forests, is adjacent to blocks mined by the Adani Group.

The Coal Ministry not only acted on the association’s demand to open up the two blocks but went a step ahead and pushed for a review of the environment ministry’s suggestions in 2018 that 15 coal blocks, which includes one of the two, should be exempt from coal mining auctions since they fall in areas that have high biodiversity value and need to be conserved.

To pave the way for the review, the Coal Ministry tasked the country’s Central Mine Planning and Design Institute (CMPDI) to see if portions of these 15 blocks could be carved out to allow mining without disturbing the forests. The Institute, affiliated with the Coal Ministry, is a “specialist consultant for all those in the mineral and mining sector”, according to its website.

The institute, in its presentation, clearly informed the Coal Ministry that none of the 15 coal blocks can be opened up for mining since they are in areas covered by very dense forests.

However, the Coal Ministry overruled its own expert scientific institution. It omitted key parts of the institute’s opinion in its correspondence with the Environment ministry and misrepresented the institute’s views on the subject. It even regurgitated arguments the Association of Power Producers used in its correspondence with the Environment Ministry.

Eventually, the Coal Ministry opened up four of the 15 coal blocks that the Environment Ministry had forbidden for mining. One of these four was the Madhya Pradesh-based block the Association of Power Producers had specifically lobbied for.

The block was put up for auction in the recently concluded 7th tranche of commercial coal mining auctions. It received only one bid – from the Adani Group. Since there were no other bidders, the auction was declared unsuccessful. However, there is a catch here. More on this in part two of the series.

“It’s interesting that the association demanded that the block be put up for auction but only Adani became the sole bidder,” said Priyanshu Gupta, Assistant Professor at the Indian Institute of Management, Lucknow. “It can raise questions about institutional capture,” he said.

Apart from the Adani Group, the Association counts Vedanta, RP Sanjiv Goenka Group, Reliance and others as its members.

“The private sector plays a significant role in ensuring energy security for the nation and helps the government reduce dependence on international markets for critical imports,” an Adani Group spokesperson told The Collective over mail.

“As a regular practice, various forums seek industry members’ input to make relevant representations to the government.”

Detailed queries sent to the Ministries of Coal, the Environment and the Association of Power Producers remained unanswered despite reminders.

Manufacturing Demand

In the first week of October 2021, media reports carried an alarming statistic: India’s coal-fired power plants had only enough coal to last four days. The reports claimed this was “the lowest level in years”. The Coal Ministry refuted all claims of India facing a “coal shortage” in Parliament. It said the shortfall of stocks in power plants was on account of a demand surge and involved logistical reasons: heavy rains had interrupted transport of coal from mines to power plants.

Experts have warned that the news of a momentary shortage of stocks in power plants could be used as a ruse for the government to hand over more mines to private companies.

A month later, Ashok Khurana, the director general of Association of Power Producers and former bureaucrat of the Power Ministry, sent an email to the then Coal Secretary drawing attention to the news of coal shortage.

The association claims on its website that its role is to “highlight the issues facing the private sector, and ensure timely redressal to ensure that our (the private firms’) capacity addition targets can be met.” Adding that they are “an interface between private sector and the Government of India”, the Association says that it “has been repeatedly acknowledged as a responsible industry representative by the Government of India”.

The email, dated 29 November 2021, begins with the Association appreciating the government for “Atmanirbhar Abhiyan” and for “opening of commercial coal mining sector for private players”. Pointing towards the coal “shortage” that plagued thermal power plants, the Association said, “It is clear we need to shore up our self-reliance to fulfill the energy needs of the nation”.

The Coal Secretary is the top government official responsible for overseeing the coal sector, and part of their role is to be aware of the status of coal reserves in the country. But Khurana, by playing up the rumour of a coal shortage, was making a case.

Khurana named two blocks he thinks should be “included in the upcoming coal auctions” to “meet coal demand in the central and western part of the country”. First, he suggested Mara II Mahan block situated in Madhya Pradesh’s Singrauli coalfield. The block has over 950 million tonnes of coal and is spread over an area more than 50 sq km with 90% of that area classified as forests.

The second block Khurana recommended was Hasdeo Arand’s Pendrakhi. The block lies adjacent to Parsa and Kente Extension coal blocks – both of which are allocated to Rajasthan’s power distribution company and mined by the Adani Group. Companies prefer blocks adjacent to ones they already have for logistical reasons – ease in utilising existing infrastructure and transport. A summary of the Pendrakhi coal block’s area and coal reserves is not available on Coal Ministry or its affiliated websites.

While the block is not part of the 15 blocks the Environment Ministry recommended against auctioning in 2018, it is “close to the Lemru Elephant Reserve” as official correspondence notes. The Chhattisgarh government demarcated a part of Hasdeo Araya forest as an elephant reserve to keep the area off limits to mining and as a remedy to rising human-elephant conflicts in the region. Additionally, the state government passed a resolution in its assembly to not allow mining in Hasdeo Arand.

Four days after receiving Khurana’s letter, a Deputy Director in the Coal Ministry sent a letter to the Central Mine Planning and Design Institute drawing their attention to the association’s demand.

The Ministry decided to act on the Association’s demand despite claiming in Parliament, later the same month, that the country had not seen a coal shortage.

“Mara II Mahan coal block is among the 15 such coal blocks in respect of whom the MOEF&CC (Ministry of Environment, Forests and Climate Change) has conveyed that these blocks fall in area which need to be conserved and should be avoided,” the letter said. “CMPDIL is therefore requested to furnish their comments as to whether such blocks may be considered after taking out some portions that may be fragile”.

On 10 March 2022, the Coal Ministry sent another letter to the institute citing the letter by the Association of Power Producers. This time, the letter cited a similar representation from ASSOCHAM – another industry lobby group – for including Mara II Mahan and Pendrakhi coal blocks in auctions for commercial mining.

Twenty days later, CMPDI’s general manager Chiranjib Patra replied that the Pendrakhi block is “hydrologically sensitive” in addition to its proximity to the Lemru Elephant Reserve. The Environment Ministry, Patra said, would have to confirm if portions of Mara II Mahan and Pendrakhi can be carved out for mining without disturbing the forests around.

On 29 April 2022, the Coal Ministry set up a meeting with the institute’s officials to discuss the status of the 15 coal blocks the Environment Ministry wanted to keep off auctions. Pendrakhi was excluded from this review since it was not part of the list of 15 blocks. It has not been placed for auction either.

The institute presented its observations on the 15 blocks before the Coal Ministry officials, who held a “threadbare mine-wise discussion on each block”, according to the minutes of the meeting.

The institute concluded that “it may not be possible to carve out some portion” from any of the 15 blocks for coal mining. For Mara II Mahan, it said, “Block has 90% green cover. It may not be possible to carve out some portion from the block.”

Twisting Facts

Undeterred, then Coal Secretary Anil Kumar Jain wrote to the Environment Ministry in August 2022 that “CMPDI has informed that out of the aforesaid 15 coal blocks, five blocks do not fall in sanctuaries/National Parks/ESZ but have very dense forest or high green cover.”

The Ministry intends to put these five blocks up for auction, he added, “Considering high grade coal and substantial reserves in these blocks.”

Jain completely omitted the fact that the institute had specifically said no portions of the blocks could be carved out. In the five blocks, the forest cover ranged from 82% to 99% of the total area of the block.

On 15 December 2022, the Director General of Forest wrote back. “All mining proposals are processed on a case to case basis”, he said. “In case any forest land is involved, in any particular mine, then before starting actual mining operations, approval of the Central Government under the Forest (Conservation) Act, 1980 must be taken by the concerned user agency,” he added.

The letter did not refer to the Ministry’s 2018 decision to keep the blocks off auctions. No references were made to the forest cover either.

Game On

On 29 March 2023, the Coal Ministry announced the seventh tranche of commercial coal auctions with 98 blocks up for grabs.

Four blocks – Mara II Mahan, Tara, Mahan and Tandsi III & Tandsi III (Extension) – among the 98 on offer were from the list of 15 the Environment Ministry had recommended against auctioning.

None of these four were successfully auctioned. Mahan, Mara II Mahan and Tandsi III & Tandsi III (Extension) received only single bids, thus ruling them out of competition. Tara block saw competition with three bidders in the fray but was withdrawn after the Chhattisgarh government asked the Centre to exclude the block from the auctions.

The only bidder for Mara II Mahan was Mahan Energen Limited – an Adani subsidiary. This is the same block that the Association of Power Producers had lobbied for.

Mahan Energen Limited also owns the Mahan Thermal Power Plant situated in Madhya Pradesh’s Singrauli coalfield, which also houses the Mara II Mahan coal block.

“This matter concerns the relevant ministries and authorities and hence we would not be able to comment on it,” Adani Group spokesperson said regarding the decision to overturn Environment Ministry’s recommendations against opening up Mara II Mahan for mining.

“As you may be already aware that Mara II Mahan Block is an underground mine, which has the least impact on the immediate environment, without the need for large-scale human displacement and deforestation during its development,” they added.

Adani Group’s hunger for coal from Singrauli coal fields began to grow with the acquisition of this 1,200 MW power plant from Essar Power for Rs 4,250 crore in March 2022. It had emerged as a successful bidder for the power plant in June 2021 — four months before the Association of Power Producers lobbied to open up the Mara II Mahan block.

The power plant was originally meant to source its coal from the Mahan coal block, adjacent to Mara II Mahan, in Singrauli but couldn’t due to environmental and legal tangles. In 2006, then Congress-led government allotted the Mahan coal block to fire a power plant jointly proposed by the UK-registered Essar Group’s Essar Power and Aditya-Birla Group’s Hindalco Industries. By 2010, the government had classified the entire Singrauli Coalfields as a “no-go area”, meaning the area was too biodiverse and forest-rich to be mined. The “no-go” policy itself fell out of favour, with a top committee of cabinet ministers of the then government dismissing it as “having no legal basis”.

Even as the government began chipping away at the policy, the Mara II Mahan and Mahan coal blocks remained off limits for miners, turning into a battleground with environmentalists, tribespeople and environment ministry on the one side and miners and coal ministry on the other. The Modi government, too, while releasing a list of mining blocks for sale in 2022 had said that forests having green cover greater than 40% would not be put up for auctions in the tranche. However, it has now abandoned the decision.

In August 2023, the Adani Group received a green clearance to expand the power plant by adding 1600 MW capacity to the existing 1200 MW over an area of 920 acres. In its official submissions for expansion, the Group subsidiary noted that it will source its coal for the plant from government-owned Western Coalfields and “from commercial coal mines in the vicinity of the project site”. To fire the plant, the neighbouring coal-rich Singrauli forests were tantalisingly close for the group but were out of bounds for mining.

In the recently concluded seventh tranche of commercial coal mine auctions, the Mara II Mahan coal block, which is in the vicinity of the plant, was up for grabs after lobbying by the Association of Power Producers. Mahan Energen, the company that owns the Mahan Power plant, was the sole bidder. The auction was annulled. But, the block is now up for grabs.

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Part 2: Coal Reform Overturned: After Failed Auctions, Centre Hands Out Coal Blocks At Discretion

On 17 August 2022, the Union coal ministry declared the Adani Group as the successful bidder for a 250 million tonne coal block in Madhya Pradesh’s Singrauli forests. The auction for the Gondbahera Ujheni East coal block was unusual. Adani Group was the lone bidder.

Documents reviewed by The Reporters’ Collective show the Adani group cornered the block even when the auction failed because the government had quietly changed the coal auction rules, making it easier for companies to grab coal blocks even in the absence of competition.

The documents reveal that the government has given itself the discretionary powers to allot coal blocks to lone bidders even when auctions fail to deliver competitive bids.

The rules also contradict the assertive claims of transparency made by the Narendra Modi government, which amid much hype, introduced new laws and regulations to auction coal blocks. Seven years later the promise of ending discretionary allocation and replacing it with fair competition are tossed aside when auctions fail. These rules have also undermined the spirit of the landmark 2014 Supreme Court order that struck down arbitrary and discretionary allocations of coal blocks, an order that annulled 204 such allocations by the previous UPA government that were dubbed by the media as ‘Coalgate scam’.

Records show the Adani group is not the only beneficiary of these discretionary powers the Union government has handed itself. The government has resorted to such discretion in at least 12 cases and allocated coal blocks to private companies after failing to attract competition. The firms that have bagged these blocks include Vedanta-owned firms, JSW Steel, Birla Corporation and other lesser-known companies.

In part one of the investigative series, The Collective revealed how the power industry lobby got the government to open up sensitive forest patches in Madhya Pradesh for coal mining. The lobby eyed two blocks in particular. Adani Group, a member of the lobby, was the lone bidder for one of the two blocks the government opened up after overturning years of advice from the Environment Ministry against such a move.

Part two of the series reveals how the government gives away coal blocks to private companies through a discretionary government allotment route when only a single bidder turns up for the auctions. The fire sale of coal mines comes despite the country not needing additional coal supply now, and having allocated enough coal blocks to take care of the country’s power requirements for the next decade.

“There is completely transparent auction process with an equal opportunity for every company registered in India to participate in the commercial coal mining auction held by the Ministry of Coal,” an Adani Group spokesperson told The Collective over mail. “There are no barriers such as financial and technical eligibility to prevent the competition.”

“We operate strictly within the Government’s auction regime and extant norms & regulations. The most technically and commercially competitive bidder is awarded the mineral blocks,” said a Vedanta Aluminium spokesperson.

Detailed queries sent to the coal ministry did not elicit a response despite reminders.

Deja Vu

The commercial coal mining regime, ushered in by the Modi government in June 2020, has allowed coal block allotments to take place at its discretion, specifically that of a committee comprising secretaries of four government departments. The group of four secretaries, called the Empowered Committee of Secretaries, has powers to decide which blocks should be given away to the sole bidder and which should not be. But there is no publicly available criteria to show how the committee makes decisions.

The Singrauli coal block that Adani Group won was put up for auction twice – once in March 2021 and then in September 2021. On the first occasion, the block attracted a sole bidder, leading to the auction being annulled. Public records do not reveal the identity of this bidder. In the second attempt, Adani was the sole bidder. The government then referred it to the Empowered Committee, which decided to hand the block over to Adani Group at the cost the company had bid for, a process that undermined the principles of a good auction of public assets: get a healthy number of potential buyers and stop collusion (single bidders for auctions raise questions about the potential for collusion or for the market’s demand for the asset) to ensure the best price for public wealth.

This discretionary regime is a new version of the pre-2014 allotment method that the Supreme Court called “arbitrary”. The Comptroller and Auditor General of India (CAG) and the apex court had then flagged the loss of revenue to the government over its choice to not auction the coal blocks and instead allocate them through a government committee. BJP, which was then in the opposition, had dubbed it ‘coal scam’.

“The country needed to expand power production when the discretionary allotment process began in the 1990s. The country needed more coal and earning revenue from it was not a goal. The situation now is extremely different. We’re entering an era of surplus coal. There is simply no need for the government to give away blocks to private companies just because they could not attract sufficient competition,” Priyanshu Gupta, Assistant Professor at the Indian Institute of Management, Lucknow, told The Collective.

“It shows that the Ministry is desperate to sell off natural resources for whatever price it may get.”

The BJP-led Modi government, which rode to power on an anti-corruption wave, had drummed up the “coal scam” in its campaigns. Immediately after Modi’s ascension to power came the Supreme Court landmark judgement in August 2014 that quashed allocations for 204 coal blocks allotted over the years. It flagged the lack of transparency in these allocations: a “screening committee” had allotted the blocks without auctions.

By 2015, the government under Modi ushered in a new law to auction the 204 coal blocks through “transparent” methods. Blocks that were not among this list of 204 are auctioned under a separate law. Under this regime, the government would auction some blocks to private companies and allot some to government-owned ones. While there were still restrictions on private players bidding for coal blocks, these were completely done away with in 2020.

The government had in 2015 claimed that its auction regime would generate over Rs 3 trillion in revenue for the public exchequer. Over the years, the government kept chipping away at the terms of auctions making it easier for private companies to grab coal blocks at lower prices. It has done so despite its officials claiming that the country has a surplus capacity for the production of coal.

Eventually, less than five years after its claims of transparency, the Modi government reversed its stand and created a parallel allocation route for private companies through an Empowered Committee of Secretaries. This Committee was set up in May 2020. Coal blocks are once again being allocated by a group of bureaucrats with powers to decide which company can get a block and which cannot in case there is a single bidder. Since these are blocks with a single bidder, the earnings for the exchequer will by default be low, as confirmed by analysis from independent researchers. With this, it has undone the effect of the 2014 Supreme Court judgement.

The new loophole in coal allocations can make collusion easier for companies. In the past, as The Collective has shown, firms had to set up elaborate networks of shell firms to undercut competition while genuine potential competitors acted as dummy participants. The Coal Ministry and the CAG had flagged instances of bid rigging by collusion among competitors in the past. Now, experts The Collective spoke to caution, all a company has to do is ensure that it’s the only bidder at the auctions, to get the block it wants at the minimum possible cost to the company.

As shown in part one of the series, the Association of Power Producers lobbied to get the government to open up Mara II Mahan coal block in one of India’s most sensitive forest patches of Singrauli. Once its attempt was successful, only one of its members — the Adani Group — bid for the block. The Collective could not independently verify if the auction involved any collusion among the members of the association to kill competition.

“The premise of the whole coal scam in 2014 was that the government has lost a lot of money by giving away blocks without price discovery,” Nandikesh Sivalingam, Director, Centre for Research on Energy and Clean Air told The Collective.

“What has happened to the idea that coal should be auctioned in a transparent way? We are seeing that idea slowly unravel.”

Full circle

The first tranche of coal auction under the Modi government generated excitement and saw competition among corporates for coal blocks.

“We are focusing on bringing transparency in allocation of natural resources including coal blocks,” then Home Minister Rajnath Singh said at a public event in January 2015. “We have been able to rebuild confidence and trust that is extremely important to revive investments and drive higher growth,” he said.

But in subsequent tranches, the number of competitors and consequently, the revenue generated for the government, went down.

In the first five tranches, the government put up 71 blocks for auction of which 31 were sold. As coal mine auctions refused to generate heat, Prime Minister Narendra Modi introduced commercial coal mining to free the coal sector from, what he described as, “decades of lockdown”. This was when the first wave of Covid-19 pandemic was ravaging the country.

Before Modi introduced commercial mining, only companies with a designated purpose for the coal they mined, such as to power their thermal power plant, were eligible to participate. Under commercial coal mining, the Modi government did away with all such restrictions on who could participate in coal auctions.

It also changed the bidding parameters. Under the Modi government’s previous coal regime, companies with captive power plants willing to pay the highest for a coal block would win. With commercial coal mining, “revenue share” became the parameter – referring to the percentage share of revenue generated from mining that the company was willing to share with the state government. The company willing to share the higher percentage of revenue with the state would win.

To sweeten the deal further, the government even lowered the minimum amount a company can bid – known as ‘floor price’ – in the first tranche of the commercial auctions.

Despite easing up thresholds and entry barriers, the response to auctions was lukewarm. Multiple coal blocks remained unsold and numerous others saw only a single company bidding for them.

To work around the single bidder problem, the government introduced “rolling auctions”, under which blocks that saw only one bidder would be placed for another round of auction.

Even before it had announced the commercial coal auction regime, the government had set up an Empowered Committee of Secretaries comprising Secretaries of the Departments of Coal, Petroleum and Natural Gas, Legal Affairs and Economic Affairs. One of its tasks was, “In case of single bid after successive rounds of auction for a coal mine, appropriate decision regarding allocation of mine.”

The auctions consist of two levels – technical qualification and financial bid round. Bidders are ranked on the basis of the initial offer they make in the technical bid round. The standard tender document says that for an auction to take place, a minimum of two participants have to qualify in the technical round. If there are less than two bidders, the auction is annulled.

However, the tender documents issued for the second attempt of auction for blocks that remained unsold the first time around do away with this minimum requirement. Now, only a single bidder can proceed to the second and their initial offer is accepted. The matter is referred to the Empowered Committee, which then decides whether to allocate the block or not.

On 17 August 2022, this Empowered Committee directed that the Gondbahera Ujheni East block should be allocated to MP Natural Resources Private Limited – an Adani subsidiary.

Adani bagged the block without any competition after promising just 5% revenue share. For comparison, in the first tranche of commercial auctions, the minimum revenue share for any bidder was fixed at 4%. Gondbahera Ujheni East was one of two blocks the committee handed over in August 2022 after repeated auction rounds failed to attract more than one bidder. The other block, Tokisud II, was allocated to a company called Twenty First Century Mining Private Limited.

These two are among at least 12 such cases where the government has handed over the blocks to the sole bidder over the last three years.

“Earlier we had a screening committee handing out blocks. Now you have an Empowered Committee. The work is the same but the name has changed,” Gupta of IIM Lucknow told The Collective.

With this allocation route, the country comes full circle back to the original problem that the Supreme Court and subsequent laws tried to solve: ensuring better price discovery.

An analysis by Gupta of revenue share bids made by bidders across four tranches of commercial coal auctions showed that the government’s revenue share plummeted as the number of bidders went down. In blocks that had sole bidders, the revenue share to the government was the least.

“If people are not interested in the coal blocks it obviously indicates low demand. Instead of waiting for the demand to pick up, the Ministry has chosen to give the blocks away to whoever comes knocking,” pointed out Sivalingam.

“We need approximately 800-900 million tonnes of coal per year currently. But if you have allocated coal blocks for around two billion tonnes then obviously there won’t be much demand,” he added.

How much coal India needs depends on electricity demand – 85% of all coal in the country is consumed by the power sector. Majority of India’s electricity, 75% to be precise, is generated from coal.

A Coal Vision 2030 document published by government-owned Coal India in 2018, noted that the blocks allocated by the government till 2017 were sufficient to meet India’s electricity needs by 2030.

However, the pandemic and global economic distress have led some to revise electricity needs. A paper published in 2023 on the country’s electricity demand by Aditya Lolla, Sivalingam, Gupta and Sunil Dahiya points out that after assuming a conservative estimate of electricity demand growth of 6% per year, the net demand for electricity by 2030 would require about 1200 million tonnes of coal. They point out that the government has allocated enough coal blocks to be able to produce 2,200 million tonnes of coal by 2030!

Previously, the Centre for Research on Energy and Clean Air has shown that the “capacity of already allocated coal blocks is around 15-20% higher than expected demand in 2030”.

The Coal Ministry is not oblivious to these facts. In March 2023, the Coal Minister told the media that India is poised to begin exporting coal by 2026.

Update

Ministry of Coal responds:

“It is noted that there appears to be a gap in understanding the transparent process adopted by Ministry of Coal for auction of coal mines,” the Ministry said in an email sent to The Collective after the publication of the story.

The Ministry has not refuted a single fact reported in the two-part series on coal mine auctions. Its full statement has been uploaded on Reporter’s Collective website.

(Shreegireesh reports and writes on issues of economy and governance. He particularly loves to use the Right to Information Act to find stories. A former TEDx licensee (2016-18), he graduated from Delhi’s Indian Institute of Mass Communication with a diploma in English Journalism. Before joining the collective, he worked with Business Standard. Courtesy: The Reporters Collective. Reporters Collective is a group of like-minded Indian journalists who collaborate to report on stories that put the spotlight on those in power; and who shed light on how India’s political economy and governance functions.)

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