Coal Auction: Independent Analysis Reveals All 42 Companies Violate Norms, Suggests Proper Test

For the first time in five decades, India’s coal reserves are up for grabs to private sector bidders. The auction for 38 coal blocks is currently underway. As key corporates are competing to add coal reserves to their list of assets, many activists and environmental experts are sounding alarms to point out their inadequacies to acquire this precious chunk of India’s key natural resource. 

An independent assessment by the NGO, Environics Trust and the Mineral Inheritors Rights Association (MIRA) shows that not even a single company qualifies the fit and proper person test often used by international agencies as a benchmark for a place in the bidding process of natural resources. 

To ensure the integrity of the bidding process and subsequent allocation of coal blocks, the researchers collected evidence based on reports from regulatory bodies, reliable internet sources, legal findings, and news sources. The study claims that it aimed to evaluate the companies’ credentials from various angles to ensure that national wealth is not handed over to any entity which has a poor track record.

Speaking to NewsClick about it, Saswati Swetlena, Coordinator, MIRA, an association of multiple civil society organisations, said, “The fit person test is crucial to ensure transparency and accountability. In our analysis we factored in several things to hold companies accountable and to see if they are fit to be given such a huge proportion of our resources. These included their financial record, their positions on environmental violations and responsibility towards the affected communities among others.”

Also read: Commercialisation of Coal Mining Can’t Lead to Minimising of Imports as Govt Claims

However, not a single company qualified the standards, she said, adding, “Six companies were incorporated this year out of which five got registered in less than three months from the bidding submission date. (See table below). Moreover, some of the bidding companies have almost no information about their mining experience, leading to questions on their eligibility to mine especially in sensitive zones. How can these companies be even allowed?”

List of companies that do not provide information about mining experience:

Earlier when questions were raised about the eligibility of the firms, the central government had claimed it is incorporating a wide variety of companies in the pool so as to widen it, giving opportunities to many.

The report further stated, “The auction regime was brought in the country after the huge scam on allocations. The court felt that auction was the best process of price discovery. However, the 10 tranches of auction and consistent sweeting of the offers and the limited number of participants, especially those who have a bad track record, shows the need to conduct an elaborate fit-and-proper person test before allowing any entity to participate in the auctions.”

Not only that, “Further, the auctions which do not have consent from the communities in the area are compromising the Constitution by creating vested interests in third party lands through administrative feats. This preliminary assessment clearly points out that all the bidders would not qualify if a serious analysis is undertaken by the Government, which is duty-bound to do this as a custodian of citizens wealth,” the report added.

The researchers have demanded that the fit and proper person test should include the ability of the company and the agency enabling the mining activity, whether of the central or state government to ensure that the process can be undertaken within the Sustainable Development Framework (SDF), even if its own conception has certain limitations.

The SDF enunciated by the central government is based on the following eight key principles. Incorporating environmental and social sensitivities in decisions on leases, assessment in key mining regions and managing impacts at the mine level impact through sound management systems. Also including, ethical functioning and responsible business, as most of the companies bidding were seen to be violating these norms.

Earlier in 2015, India had introduced competitive auctions for coal mines. This year, the government amended the law to remove these restrictions and allow commercial coal mining – that is, auction winners will now be able to mine and sell coal both domestically and globally, without any restrictions.

Initially, the Centre had come up with a list of 80 coal blocks through a discussion paper and sought suggestions from the potential bidders as to which of the blocks should be prioritised. Ultimately, the call began with 41 blocks but with protests and interventions from state governments, some blocks were removed and some new included, with the total blocks for auction now standing at 38. As the auction process has progress, only 21 blocks have been able to draw more than one bid. One of the companies has failed even the lax technical conditions. 

The report can be accessed here