The Bharatiya Janata Party and other opposition parties are crying foul over Prime Minister Manmohan Singh’s alleged involvement in the coal blocks allocation scam but the BJP-led Chhattisgarh and Rajasthan governments themselves were among the strong opponents to a transparent process of competitive bidding, and pitched for continuing the policy of allocation of coal blocks.

Documents with The Hindu show that the BJP governments were against putting in place an efficient and transparent method that would have dealt firmly with any kind of corruption in the allocation process.

The Coal Ministry had in February 2005 written to various governments seeking their views on competitive bidding. It was sought to be introduced to replace the existing system of allocation of coal blocks for captive use on a nomination basis.

In his argument against the competitive bidding process and response to the then Secretary (Coal) P.C. Parakh, Chhattisgarh Chief Secretary A.K. Vijayavargiya stated: “There is a substantial gap between the requirement and the domestic availability of mined coal in the country. Coal is used directly in sponge iron kiln/blast furnace, as also for captive power generation by the iron/steel industry. The projections are that the gap between the domestic demand and the supply will continue. Under such a scenario, the proposed bidding process involving production sharing by successful bidders with Coal India would result in substantial increase in the cost of essential input (coal) to such iron/steel units who do not have access to captive coal blocks allotted on nomination basis.”

Level-playing field

The Chhattisgarh government expressed fear that the suggested policy change was likely to shift the new steel/iron units from poorer inland States to comparatively rich coastal States. The proposal, would, therefore, be detrimental to the development/growth of iron/steel industry in inland States like Chhattisgarh, Jharkhand and Madhya Pradesh. “The proposed change aims at moving towards a free market scenario. An essential policy ingredient for the success of the free market mechanism is creating a level-playing field among various players. However, no mechanism has been proposed to create a level-playing field among the existing iron/steel units having access to already allotted captive coal blocks and those who will have to source coal through the bidding process. The proposed change, therefore, is expected to make pipeline/new projects unviable, resulting into slowing down of the growth of domestic iron/steel industry for reasons of non-competitiveness in sourcing the essential input — coal,” it said.

Raje’s letter to Manmohan

The then Rajasthan Chief Minister, Vasundhara Raje, in her letter to the Prime Minister on April 11, 2005, said that although there were no known coal deposits in Rajasthan, the proposed change for allotment of lignite under the competitive bidding process would not be appropriate and would be against the spirit of the Sarkaria Commission recommendations.

Ms. Raje argued that the proposed change would take away the State’s prerogative in selection of the lessee. For, under the proposed system the lessee would be chosen by the Centre through competitive bidding.

“The State government is evolving a policy to allot lignite leases only to such parties which would be willing to establish lignite-based power plants within the State for meeting power shortage of Rajasthan. The proposed process could result in lignite being mined by the successful bidder for use at locations outside the State. It is therefore requested that the existing practice of allocating lignite mines be continued.”