PMO: Hindalco coal block allocation based on merit

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New Delhi, October 19:  Prime Minister Manmohan Singh had formally endorsed the Coal Ministry’s decision to overturn the Screening Committee’s recommendation in order to accommodate Kumar Mangalam Birla’s company, Hindalco, which was granted an additional mining block.

Dr. Singh was ‘satisfied’ that the final decision taken in this regard was ‘entirely appropriate’, and was based ‘on the merits of the case placed before him’. This is the first time Dr. Singh has clearly and unequivocally come out in support of the former coal secretary P.C Parakh, in the wake of the recent controversy where Mr. Parakh, along with Mr. Birla, has been named by the CBI in a fresh FIR.

In a detailed press statement, the Prime Minister’s Office (PMO) has outlined the various stages in decision-making, recognising that the final decision differed from an earlier recommendation.

Mr. Birla wrote to the PM in May 2005, requesting allocation of Talabira-II and III blocks in Orissa to Hindalco. In August 2005, the Coal Ministry sent a file to the PM, 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 the coal despite being provide adequate coal linkages from Mahanadi Coal Limited (MCL). Additionally, NLC and MCL could develop the two blocks – 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 another related bauxite mine lease had not materialised; and MCL would not be able to supply coal as per the earlier linkage.

Orissa CM’s letter

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

On 16 September, 2005, the Ministry suggested that the two blocks ‘be mined as a single mine with the mining done by a joint venture formed between MCL, NCL, and Hindalco’, with the share-holding a 70:15:15 ratio respectively. The Ministry reasoned, among other factors, that Hindalco’s case for allocation had been 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 Screening Committee decision – the Orissa government’s recommendation; the requirement that both central and state government ‘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 PM 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 Dr. Singh had reiterated that the government would cooperate with CBI in the investigation of the coal block allocation, and would do so in the present matter too.

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