Coal scam: Kumar Mangalam Birla, ex-coal secretary named in CBI FIR
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New Delhi: The Central Bureau of Investigation (CBI) said on Tuesday that it filed a first information report (FIR) against Kumar Mangalam Birla , chairman of the Aditya Birla group, as well as Hindalco Industries Ltd,in the case related to the allotment of captive coal blocks between 1993 and 2010. The company denied any wrongdoing.
“They have been booked for criminal conspiracy,” a senior CBI official said. “The FIR states that in the year 2005, these people colluded in criminal conspiracy with one another and the public servants then abused their official position to show favours to one private company,” the official said, detailing the contents of the complaint.
“Simultaneous searches were conducted on Tuesday at Mumbai, Delhi, Bhubaneswar and Secunderabad,” the official added, asking not to be identified. Two Hindalco offices in Mumbai, one in Delhi and one in Bhubaneswar were searched, said the official.
An FIR has also been registered against former coal secretary P.C. Parekh and “unknown persons and officials”. Parekh’s residence at Secunderabad, the twin city of Hyderabad, was also searched on Tuesday.
The official said Birla had not been questioned yet. This is the 14th case that the investigating agency has registered in its probe into the alleged irregularities in the allotments of coal blocks.
Coal field allotments became controversial after the Comptroller and Auditor General of India, the government auditor, estimated in a 2012 report that the nation had suffered a notional loss of Rs.1.86 trillion because of the allocation, rather than auction, of coal blocks.
The CBI is investigating these allotments as part of a Supreme Court-monitored probe.
The new FIRs have been registered in connection with the allotment of the Talabira-II coalfield in the Jharsuguda district of Odisha, a part of which was allocated to Hindalco Industries in 2005. The CBI official said that the block in question had initially been allocated to state-owned Neyveli Lignite Corp. Ltd (NLC) as per a recommendation of the screening committee that decided upon these allocations.The official said that following this allocation, Birla met Parekh, the then union coal secretary, “in the latter half of 2005”. After this meeting, “the decision was overturned” and the block had to be shared between Hindalco, Mahanadi Coalfields Ltd and NLC.
“This particular coal block was to be given only to the PSUs (public sector units),” the CBI official said. “But allegedly, after Mr. Kumar Mangalam Birla met the then coal secretary a decision was taken to overturn the screening committee’s recommendations and Mr. Kumar Mangalam Birla’s Hindalco company was accommodated in that particular coal block, and they were also allowed to mine,” the official added.
A spokesperson for the Aditya Birla group said on Tuesday morning that the company had not received any FIR. The company later released a statement by Debu Bhattacharya, managing director of Hindalco, which said the allegations reported by the media against Hindalco and Kumar Mangalam Birla were “unfounded”.
“In fact, the application for the Talabira II mine was made in 1996 by Indal, the Indian subsidiary of Alcan, the Canadian aluminium major,” the statement said. “Indal was acquired by Hindalco in the year 2000, after which Hindalco pursued the matter further. The actual allocation of the mine was done in November 2005, which is nine years after the first application was made.”
“In the interim, Hindalco made several representations to the Government as any corporation would normally make in such circumstances, and only through formal channels. To imply that our Chairman, Mr. Kumar Mangalam Birla, managed to overturn the decision of the screening committee, is preposterous.”
Talabira-1I and Talabira-III have in fact been allotted jointly to Mahanadi Coal Fields and Neyveli Lignite, both public sector units, with Hindalco having only a 15% stake in the joint venture, the statement said.
The project for which the Talabira-II mine was allocated, Aditya Alumina and Aluminium Project, is ready to commission later this month but the permit for mining has not been received so far and no mining has been carried out, the company said. “This will mean delayed returns from Aditya Aluminium, which has been set up at a capex of over Rs.11,000 crore.”
The company’s website says that the Aditya Alumina and Aluminium Project, which would take coal from the block, is an “integrated greenfield aluminium complex”.
It includes a 4.2 million tpa (tonnes per annum) bauxite mine, a 1.5 million tpa alumina refinery at Kansariguda and a 359 ktpa (kilo-tonne per annum) smelter at Lapanga.
“The project is backed with 900MW captive thermal power plant and has access to captive coal from Talabira-II coal block, a JV (joint venture) between Mahanadi Coalfields and Neyveli Lignite Corporation,” the company website says.
Shares of Hindalco gained 1.45% to Rs.112.20 on the BSE on Tuesday, recouping early losses, while the benchmark index lost 0.29%, or 59.92 points, to 20,547.62.
A shortage of coal in India has held up several projects. A research report, authored before Tuesday’s CBI case, voiced concerns over the raw material availability that could hurt Hindalco’s results.
“Depletion of reserves at the existing coal blocks and no guarantee on new linkages to ensure fuel security remain a recurring theme for its (Hindalco’s) Indian operations even as hopes ride high on Mahan coal blocks,” said the report from Espirito Santo Securities dated 11 October that reiterated a ‘sell’ call on Hindalco’s shares, estimating fair value at Rs.90.
The Mahan aluminium project in Madhya Pradesh that includes a 359,000 tonne smelter and a 900MW power captive plant, has access to the Mahan coal block through a joint venture with Essar Power Ltd, the company’s website shows.
In the Mahan coal block, Hindalco has a share of 3.6 million tonnes of coal and this has received stage one clearance from the ministry of environment and forests, but it awaits stage two clearance before the joint venture partners can start production, the company’s website adds.
According to information taken from the coal ministry’s website, Mahan, with geological reserves of 144.2 million tonnes, was allocated to Hindalco and Essar in 2006.
At a press conference on 14 August for the announcement of the first quarter results, Hindalco’s chief executive expressed confidence in getting the approvals for Mahan coal block well in time. “I would be very surprised if the clearance for stage II (from the government) does not come by December,” Bhattacharya told reporters, speaking on the progress of the Mahan aluminium project where trial production has started.
This, he said, would help lower the cost of production at the Mahan aluminium smelter.
But Espirito Santo did not share the optimism.
“While the management remains positive on the Mahan coal block, we see its joint venture partner having a different view,” the Espirito Santo report says. “As per its joint venture partner Essar, the Mahan coal block will become operational only in the second quarter of FY15.”