Questions the CBI should answer before closing its probe in the Jindal coal block case

Even under the Bharatiya Janata Party-led National Democratic Alliance, the Central Bureau of Investigation's inquiries into the captive coalblock allocation scam continue to be half-hearted.

In the latest instance, as the Indian Express reported on April 2, India’s apex investigating agency has closed its probe into how former Congress Member of Parliament Naveen Jindal’s Jindal Steel and Power Limited landed the Ramchandi Promotional coalblock in Odisha.

This was one of two blocks allotted by the previous United Progressive Alliance government – not for captive use – but to convert the coal in these blocks to oil using a technology that had never been used before in India.

The other block was North of Arkhapal Srirampur in the same state. It went to Strategic Energy Technology Systems Limited – a joint venture between India’s Tata Group and South Africa’s Sasol, an energy and chemicals company.

Puzzling decisions

Controversy surrounded these allocations from the start. In January 2007, Prime Minister Manmohan Singh had set up an Inter-Ministerial Group, comprising secretaries from economic ministries and experts from the erstwhile Planning Commission, to examine whether coal-to-liquid technology, which converts coal to oil, should be introduced in India. Two years later, the group recommended blocks be given to both Tata-Sasol and Jindal Steel and Power Limited.

In the intervening period, several puzzling developments took place. The group, which was supposed to submit a report on the desirability of trying coal-to-liquid technologies in India, was also told to recommend a company for testing the technology. In contrast, companies for captive coal blocks were chosen by a screening committee comprising bureaucrats from relevant ministries and state governments. The screening committee approach, as we know, was opaque and arbitrary. However, the Inter-Ministerial Group was not much better.

As this 2013 report in the Economic Times shows, there were sharp disagreements between the Inter-Ministerial Group members regarding the desirability of coal-to-liquid technology. A key member of the group, Surya Sethi, then principal advisor on energy at the erstwhile Planning Commission, said coal-to-liquid technology was inefficient. Sethi told ET: “When we do not have sufficient coal in the country even to fire our power plants, is it not wasteful to lose 58% of the energy input just to convert it from solid state to liquid state?”

Another disagreement pivoted around the system of allocation. The ET report said: “In the IMG’s deliberations through August, some members urged a transparent mechanism, like competitive bidding, be used. A question on profit sharing was added to the questionnaire for the applicants, but competitive bidding was never adopted.”

Despite these reservations, the Inter-Ministerial Group’s final report recommended not one but two companies. This decision, as the ET report said, surprised even the members in the Inter-Ministerial Group.

The report quoted Sethi as saying:

“Members maintain they had ranked the companies under the assumption that only one block would be given out. Most of the Inter-Ministerial Group’s minutes refer to coal block in the singular. A change to plural usage happens at the very end of the proceedings. Members say they were not aware of the change and were surprised to discover the government gave out two blocks instead of one.”

Several questions

There are other puzzles. The blocks were alloted, as the Indian Express report said, a day before the model code of conduct for the 2009 elections kicked in. As the Economic Times article said, it is not clear why Tata-Sasol and Jindal Steel and Power Limited were chosen over the other companies that applied – an initial list had 22 companies, including public sector giants like GAIL, IOC, SAIL and private sector players like Tata, Reliance, Sterlite, Adani, Essar, GMR, Jindal, and smaller firms.

The report said:

“The IMG short-listed four companies: GAIL, GMR, SETSPL and JSPL. But the first two were dropped since they had submitted letters of support from technology providers and not formal MoUs.”

This was not a valid reason, Sethi said in the ET, as “the technology providers were indifferent to the final choice of the Indian government and were willing to work with whoever was the successful bidder.”

Again in the ET article, Kirit Parikh, who headed the Inter-Ministerial Group, defended the decision saying Strategic Energy Technology Systems Private Limited and Jindal Steel and Power Limited were chosen as "as they had different collaborators with different technologies. Allotting blocks to both would help government test both technologies." But Sethi countered Parikh: "Sasol technology came from the same source as Jindal's – Sasol has modified it over the years to better suit South African coal."

Also, Ramchandi and North of Arkhapal Srirampur were massive coalblocks. Each contained 1.5 billion tons of coal. Only one other coalblock allocated for captive use – Pakri Barwadih – is larger than these two. It is not clear why, for a mere experiment to gauge the suitability of coal-to-liquid to India, the UPA handed over such large coalblocks.

Given such questions, the Central Bureau of Investigation was told to look into the coal-to-liquid allocations in July, 2013. A part of the impetus had come from a report by parliamentary standing committee on coal earlier that year. It said the inter-ministerial group "has not performed its duty honestly” and asked the government to examine the award of these two blocks.

But now, three years later, the case is being closed. The Indian Express article said that “the PE revealed that the additional block was approved by the then Principal Secretary to the PM, TKA Nair”. It added that, during examination, “Manmohan Singh told the CBI that he took full responsibility for the decision that was taken to prevent any monopoly as the proposed coal-to-liquid project was new.”

This is the latest instance of the CBI not applying itself. Even if the Inter-Ministerial Group was correct in overruling dissenting opinions on whether coal-to-liquid technology should be tried, or how the blocks should be allocated, it is not clear why the Inter-Ministerial Group was told to allot blocks; why Jindal Steel and Power Limited and Tata-Sasol were chosen; or why such large blocks were awarded.

The Indian Express reported that the CBI has informed the Supreme Court – which is hearing a number of cases regarding coalblock allocations by the previous UPA government – of its decision to close the probe. The court needs to pose these questions to the investigating agency before accepting its closure report.