The CBI has filed a first information report (FIR), formally charging Congress MP industrialist Naveen Jindal and the former junior minister for coal, Dasari Narayana Rao, in the coal mines allocation case. They are charged with fraud and corruption: the CBI alleges that Jindal’s firms misrepresented facts and paid an amount of Rs 2.25 crore into Rao’s company to get the coal mines allocated to them.

In the past, many coal mines have been allocated in fairly dubious circumstances by the government to private players. The government’s auditor reckons that between 2005 and 2009, over 15,350 million tonnes of coal under the ground, worth about Rs 1.86 lakh crore, have been allocated. This valuation may not be accurate. But the fact remains that unless India overhauls its entire policy governing coal, such instances of arbitrary allocation will continue.

Coal mining was nationalised by law in 1973, creating one state-owned behemoth Coal IndiaBSE -2.18 % (CIL) to mine and sell coal. Today, CILBSE -2.18 % is a listed company but is plagued by inefficiencies and being probed by the Competition Commission of India for abuse of its monopoly powers. Meanwhile, the government decided that to speed up growth, captive coal mines could be allocated for companies generating power or making metals or cement. Thus was born the flawed policy of arbitrary allocation of coal mines. This policy must change.

The government must first scrap the Coal Mines Nationalisation Act of 1973. It should then allow qualified mining companies from India and overseas to mine coal in the country. The most transparent way of deciding who will get these licences would be to auction the revenue share — or royalty — that will go to the Centre and states.

For each mine, the company that quotes the highest revenue share should get to exploit it. A dedicated portion of the governments’ share of revenues should be used to compensate locals affected by mining, rehabilitate them to lead a dignified life. This policy will bring dividends for all stakeholders in society and eliminate graft.

Courtesy: The Economic Times