Bidding was possible if Ministries wished to do so
Even though Prime Minister Manmohan Singh personally directed in October 2004 that all future allocation of coal blocks to private parties for captive mining would be made on the basis of competitive bidding, his own Office, along with the Coal Ministry and the Department of Legal Affairs, stalled the implementation of that decision for over seven years.
Official communication between the Prime Minister's Office and the other two Ministries between 2004 and 2006, accessed by The Hindu, shows that competitive bidding could have been introduced through a simple administrative decision, if the Ministries concerned had wished to do so.
The concept of allotment through competitive bidding was first made public on June 28, 2004. Accordingly, as decided in a meeting by the Prime Minister — in his role as Coal Minister — on October 14, 2004, all future allotment of blocks for captive mining would be made on the basis of competitive bidding.
However, the Ministry of Coal had continued to follow the non-transparent Screening Committee route for subsequent allotments till date with the approval of the PMO.
In August 9, 2005, the PMO raised several objections to the auction proposal. “After discussions, it was decided that the Cabinet note put by the Ministry of Coal for competitive bidding as a selection method for allocation of coal and lignite blocks for captive mining will be amended to take into account the concerns of the State governments where the coal block is located,” said a PMO note. “Further, it was noted that the Coal Mines (nationalisation) Act, 1973 will need to be amended before the proposed competitive bidding becomes operational.”
The Coal Ministry, meanwhile, engaged in a back-and-forth correspondence with the Department of Legal Affairs, regarding the legal route necessary to allow auctions. In June 2004, it sought opinion on whether the Coal Mines (Nationalisation) Act 1975, the Mines and Mineral (Regulation and Development) Act, 1957 and the Mineral Concession Rules, 1960, could be read to allow auctions. In its reply in July 2004, the DLA stated: “From the perusal of CMN Act it appears no specific provision for auction through competitive bidding was given in the Act.” In August, the DLA suggested that Section 34 of the CMN Act be amended to allow auctions.
After two years, the Ministry of Coal changed course, and asked the DLA for its opinion on an amendment of the MMDR Act instead of the CMN Act. The DLA agreed that an amendment proposal could be introduced in the MMDR Act.
The DLA then suggested that the Acts need not be amended. Instead, a simpler amendment of the existing process would suffice to allow auctions. “As to which course is to be adopted in the present case, i.e. to amend the Act or to effect the changes in the administrative instructions, is a matter of policy to be decided by the referring Ministry,” it concluded.
In August 2006, the Law Secretary weighed in, saying that while auctions could indeed be conducted without amending the Act, “if provision is made for competitive bidding in the Act itself or by the virtue of Rules framed under the Act, the bidding process would definitely be placed on a higher level of legal footing.''
However, the Ministry of Coal went ahead with allocation of coal blocks through the non-transparent Screening Committee method. In September 2006, it advertised for allocation of 38 blocks and continued with this process till 2009.