The Prime Minister has stepped into the firing line by coming out in support of former Union Coal Secretary P.C. Parakh — named by the Central Bureau of Investigation in an FIR which hints at possible illegality in the way a coal mine share was allotted to the private firm Hindalco — but he has done so fully confident that nothing criminal will emerge about the 2005 allotment made when he was heading the Coal Ministry. The CBI filed the FIR because it is suspicious of the manner in which the decision of a screening committee to reject Hindalco’s request for the Talabira II mine in Odhisa was later reversed. While it is unwise to prejudge the merits of a case that the Supreme Court will no doubt closely monitor, the system of allotment that the Prime Minister presided over for years surely cannot escape indictment. Indeed, if one carefully studies the sequence of events — first a categorical rejection, then re-examination after the Odisha Chief Minister pleads Hindalco’s case, leading to clearance of the coal mine share — what becomes apparent is that there was really no rule-based allocation policy.
The entire coal allocation process was mired in arbitrariness on the part of both the Central and State governments. Since mining is a State subject, States would send a list of recommendations to the Centre to be examined by the screening committee set up by the Coal Ministry. The ministry in turn would send the final list of allottees back to the State government concerned for signing mining lease agreements. This arbitrary procedure seems tailor-made for rent seekers, many of whom had never seen a coal mine in their lives but who bought blocks only to sell them at high premia. In short, the political class at the Centre and the States colluded with private businesses to parcel out a scarce resource with scant regard for revenue and equity. Allotments depended simply on a company’s ability to have its letters read and acted upon. The Prime Minister may feel confident about defending the specific allocation to Hindalco, whose promoter, Kumar Mangalam Birla, has also been named in the FIR, but he and the Chief Ministers of coal-rich States like Odhisa, Chhattisgarh, Jharkhand and Madhya Pradesh will have nowhere to hide if all the arbitrariness and rent-seeking spawned by this irrational coal allocation policy were to be comprehensively documented. It is this callous, and indeed cynical, approach to policymaking which mars the investment climate much more than the mention of Mr. Birla’s name in a CBI complaint. There are interesting parallels between the allocation of spectrum and coal, where the complicity of the political class and businesses was total. In this respect, one finds the collective outrage expressed by the business community over one of its own being named in an FIR somewhat misplaced. Big business too needs to look at the ugliness within.