PMO defends allocation of coal block to Hindalco

‘PM was satisfied decision is entirely appropriate’

October 19, 2013 05:35 pm | Updated November 16, 2021 11:22 pm IST - New Delhi

Prime Minister Manmohan Singh had formally endorsed the Coal Ministry’s decision to overturn the screening committee’s recommendation to accommodate Kumar Mangalam Birla’s company Hindalco, which was granted an additional mining block.

Dr. Singh was ‘satisfied’ that the final decision was ‘entirely appropriate’ and was based ‘on the merits of the case placed before him.’

This is the first time the Prime Minister has clearly come out in support of the former Coal Secretary, P.C. Parakh, in the wake of the controversy over Mr. Parakh, along with Mr. Birla, being named by the CBI in a fresh FIR.


In a detailed statement, the Prime Minister’s Office outlined the various stages of decision-making, recognising that the final decision differed from an earlier recommendation.

Mr. Birla wrote to Dr. Singh in May 2005, requesting allocation of the Talabira-II and III blocks in Odisha to Hindalco. In August 2005, the Coal Ministry sent a file to the Prime Minister, mentioning the screening committee’s decision to allocate Talabira-II to Neyveli Lignite Corporation (NLC). This was on the grounds that Hindalco had not used coal despite being provided adequate linkages with Mahanadi Coal Limited (MCL). Additionally, NLC and MCL could develop Talabira II and III together as one large mine.

Mr. Birla’s claim, according to the statement, was based on the fact that Hindalco was the first applicant for it; the coal linkage granted earlier was not used as a related bauxite mine lease had not materialised; and MCL would not be able to supply coal as per the earlier linkage.

During this period, on August 17, 2005, the Prime Minister also received a letter from the Odisha Chief Minister, strongly backing the allotment of Talabira-II to Hindalco as the ‘topmost priority.’ The PMO asked the Coal Ministry to re-examine the matter in the light of the letter.

On September 16, 2005, the Ministry suggested that the two blocks ‘be mined as a single mine with the mining done by a JV formed between MCL, NCL, and Hindalco’, with a share-holding ratio of 70:15:15 respectively. The Ministry reasoned, among other factors, that Hindalco’s case for allocation was strongly made by the State government.

The PMO noted that as per guidelines, the NLC: Hindalco ownership ratio ought to be 22.5:7.5 and not 15:15 as proposed. According to the statement, the following factors weighed in during the reversal of the original decision of the screening committee — the Odisha government’s recommendation; the requirement that both the Central and State governments ‘concur before an allocatee be granted a mining lease’; and the Ministry’s proposal of a 70:30 division. Relaxation of equity guidelines too, it was felt, could be considered since NLC’s requirements could be met from MCL.

In this backdrop, on October 10, 2005, the Prime Minister approved the allocation of the two blocks to a joint venture as per the Ministry’s proposal. The existing long-term coal linkage of Hindalco may also be ‘reviewed and suitably reduced’, after taking into account its requirement of coal for the project.

The PMO spokesperson has said the Prime Minister had reiterated that the government would cooperate with the CBI in the investigation of the coal block allocation, and would do so in the present matter too.

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