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Coal scam

Topics Covered: Distribution of key natural resources across the world (including South Asia and the Indian sub-continent); factors responsible for the location of primary, secondary, and tertiary sector industries in various parts of the world (including India).

Coal scam:


A special CBI court has sentenced former Union Minister Dilip Ray and three other individual convicts to three years of jail term for irregularities in the allocation of the Brahmadiha coal block in Jharkhand in 1999.

What’s the case?

The Coal Ministry through its guidelines had specifically said no company engaged in production of iron and steel or sponge iron could get a captive coal mine if its production capacity was less than 1lakh metric tonne per annum (MTPA) in opencast mining.

  • However, when private company Castron Technologies Ltd applied for Brahmadiha Coal Block in Giridih, the minister agreed to relax guidelines and allow the grant despite it not being eligible, the CBI found.

CAG had put the loss to exchequer at Rs 1.8 lakh crore and called it “the mother of all scams”.

  • The CAG had argued that the government had the authority to auction the coal blocks but chose not to and as a result allocatees received a “windfall gain”.


Coal sector in India:

  • Despite having the world’s fourth largest coal reserves, India imported 235 million tonnes (mt) of coal last year, of which 135mt valued at Rs.171,000 crore could have been met from domestic reserves.
  • India’s state-run coal giant has been unable to meet growing demand despite abundant resources.
  • The South Asian nation depends on Coal India for more than 80 per cent of its domestic production and the miner has consistently fallen short of production targets in the last few years.
  • The government has been progressively liberalizing the coal sector over the last several months to attract new investments, and getting rid of this archaic end-use restriction was a key step.

Coal Nationalization and its impact:

Till 1971-73 the coal mining operation remained primarily in the private sector and the production had come up to a level of nearly 72 million tonnes per year only.

The entire coal industry in India was nationalised during 1972-73 and then on massive investments were made by the Government of India in this basic infrastructure sector.

  • Post liberalisation reforms in 1993, the government decided to allocate coal mines to various players for captive consumption (in captive mining coal is taken out by a company for its own use and it won’t be able to sell it in the market).
  • During the high growth years of 2000s the increasing demand of Coal could not be fulfilled by the state run Coal India Ltd., leading to higher demand-supply gap.



Prelims Link:

  1. Classification of minerals in India.
  2. Major vs Minor minerals.
  3. Powers of centre vs states wet to management of minor minerals.
  4. Coal distribution in India.
  5. Imports vs Exports.

Mains Link:

What is commercial coal mining? Discuss.

Sources: the Hindu.