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Coal Scam: CBI books Nippon Denro Ispat Ltd over irregularities in allocation of Kilhoni block

Coal Scam: CBI books Nippon Denro Ispat Ltd over irregularities in allocation of Kilhoni block

New Delhi: The CBI has registered a fresh case in the coal block allocation scam, pertaining to the allocation of certain coal blocks in Maharashtra to Nippon Denro Ispat Limited (NDIL) of the Ispat Group during the period around 1996 to 1998 –in the intersecting regimes of the IK Gujral government and the short-lived first Vajpayee government.

The Central Bureau of Investigation has alleged that several coal blocks allocated to NDIL ended up being controlled by Ispat group companies that had neither applied for nor had been allocated the coal blocks for captive mining. In fact, the agency has also alleged that despite Coal India Limited and several Screening Committee meetings having rejected the proposal to allocate the Kilhoni coal block to the Ispat comapny, the Kilhoni block was allocated to it.

The CBI's FIR, registered on December 31 last year, has been converted from a Preliminary Enquiry the agency had started in 2012, based on a complaint from seven MPs headed by Sandeep Dikshit, which alleged serious irregularities in the allocation of 24 coal blocks to several private companies between 1993 and 2005. The latest case is against NDIL and unknown public servants and is just one of the instances of the alleged irregularities that have materialised into an FIR.

Kilhoni Coal Block

The CBI has alleged that the Kilhoni coal block in Maharashtra was allocated to Central India Coal Company Limited (CICCO), a company formed by NDIL and other foreign coal companies to supply coal, exclusively for the thermal power station at Bhadrwati, developed by the Central India Power Company Limited (CIPCO), a company formed by NDIL, General Electric Company (GEC) in UK and Electricity De France (EDF), by overruling previous Screening Committee decisions and the express recommendation of the Apec Committee of Coal India Limited (CIL).

After CICCO had got control of coal blocks allocated to NDIL, the company had applied to mine the Manora Deep and Ballora-Talki coal blocks, which the 11th Screening Committee considered in September 1997 and decided that the Manora Deep block could be allocated to CICCO as the Government of Maharashtra had said it had no interest in developing it for captive mining.

But the Ispat group wrote to the Coal Ministry seeking permission to mine the Kilhoni block in March 1998 so that a power purchase agreement can be approved for a term of 30 years. This matter was discussed in the 12th Screening Committee meeting and it was decided that since Western Coalfields Limited intended to use Kilhoni in the future, it would not be possible to allocate it to CICCO.

In addition, the Apex Committee of CIL had in July 1998 rejected the proposal to allocate Kilhoni to CICCO and recommended that the company either work the Lohara West block for its Bhadrawati plant or enter into an agreement with WCL for the supply of coal.

Despite these, the 13th meeting of the Screening Committee had discussed the issue in August 1998 and somehow approved the allocation of Kilhoni coal block to CICCO and also notified CIL to include it in the list of coal blocks offered up for captive mining. The erstwhile Maharashtra government eventually recommended that the Kilhoni block be given to CICCO for supply to CIPCO's Bhadrwati plant in exchange for the Maharashtra State Electricity Board (MSEB) using the Lohara West coal block.

Other irregularities

The CBI has also alleged that CICCO got control to mine the coal blocks in Lohara West, Baranj I to IV and Bander blocks excluding the Morpar block, through a government notification that was "neither in consonance with the guidelines for mining of coal blocks by associated coal companies and nor with the allocation letter issued to M/s NDIL".

What the central agency has said is that NDIL was allocated the abovementioned coal blocks by the Coal Ministry in 1993 for the supply of coal to its thermal power station in Umred. But NDIL, over the next three years, formed a holding company, which in turn had two subsidiaries –CIPCO and CICCO, allegedly allowing these companies to operate the NDIL allocated coal blocks.

In May 1994, NDIL had informed that the Umred plant would be moved to Bhadrawati, following which the Central Electricity Authority permitted NDIL, GEC and EDF to form CIPCO to develop the Bhadrawati plant. The NDIL further announced that it is forming CICCO with other foreign coal companies to exclusively mine and supply coal to CIPCO power station.

However, the Law Ministry had in July 1995 expressly said that CICCO's exclusive arrangement with CIPCO would not be permissible. But the erstwhile government went ahead with the proposal on the advice of then-Attorney General Milan K Banerji, who had suggested the issuance of a notification under the Coal Mines (Nationalisation) Act, which would be allowed for the proposal to go forward as long as the controlling company had an interest in both the mining company and the company running the thermal power station.

NDIL, then went on to create Ispat Energy Limited (which later became Ispat Urja Limited), which owned 26 per cent shares in both CICCO and CIPCO. Ispat's arrangement was put before Coal Ministry officials in December 1995, which cleared it and accordingly issued a notification in March 1996, clearing the way for Ispat Urja to own 26 per cent of CIPCO and CICCO, while CICCO would be mining coal exclusively for CIPCO's Bhadrawati plant.

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