NEW DELHI: The government’s defence in the Coalgate scam that transparent auctions for coal allocations were junked to meet an urgent demand for power and steel — glosses over official warnings that the alternate committee route was legally flawed and even counter-productive.

The alarm sounded by former coal secretary P C Parekh in July, 2004, that award of captive coal blocks could mean “windfall profits” for private players was further clarified two years later at a meeting held in the Prime Minister’s Office (PMO) on April 7, 2006.

At the meeting convened by T K A Nair, then principal secretary to the PM, coal secretary H C Gupta had explicitly stated that the screening committee system of coal allocation did not have an “express mandate or sanction of any statute”.

Gupta, whose tenure as coal secretary from 2006 to 2009 also covers PM Manmohan Singh’s charge of the coal portfolio, pointed out that the screening committee route is a “purely administrative” arrangement.

Minutes of the PMO meeting accessed by ToI make it clear the assessment was accepted and a decision was taken to seek legal remedies soon — in fact by the end of April, 2006 itself — from the law ministry.

It was decided that after legal consultations, the proposal for competitive bidding — announced in 2004 but not implemented — should be “urgently taken to the Cabinet” by mid-May, 2006.

But the proposal remained on file and the PMO stuck to the screening committee system – a decision slammed by the Comptroller and Auditor General (CAG) who said not auctioning coal blocks caused a Rs 1.86-lakh crore hole in government revenues.

The government has defended the screening committee route on the ground that views of state governments were represented and all applicants were given a hearing, but the coal ministry under the PM had said neither the Mines and Mineral (Development and Regulation) Act or the coal mines nationalization Act provided for such a procedure.

Besides, the ministry in a note put forth arguments that undercut the claim that an auction policy was held in abeyance as the time required in its implementation would have sharply aggravated coal shortages and stalled power projects.

The screening committee procedure – the panel comprised senior officials from various ministries and representatives of state governments – is tedious and time consuming as it is open to pressures, the coal ministry said.

“The pulls and pressures make it difficult to take a decision at one sitting,” the ministry said, an observation borne out by the screening committee record.

Delaying auctions until economic exigencies ruled out the option hurt the government like the anticipated jump in power, steel and cement production did not materialize while corruption charges eroded political credibility and jammed decision-making.