The scandal over coal block allocations in India – dubbed coalgate – hit the headlines again last month. The Central Bureau of Investigation (CBI), India’s federal police service, has registered a case against the former coal minister, D.N. Rao, and Naveen Jindal, an MP and head of industrial conglomerate, Jindal Steel & Power (JSPL), as part of its investigation into the allocation of a coal block in the eastern state of Jharkand.
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The scandal began last year when the Comptroller and Auditor General of India said that the government had missed out on billions of dollars in revenue by handing out coal blocks below their market value. The CBI now alleges that Rao accepted a payoff from JSPL in exchange for being awarded a coal block in Jharkand: a year after JSPL received the coal block, it invested US$ 430,000 in a firm owned by Rao. JSPL has denied the allegations and pledged to cooperate with the investigation.
In connection with this case, the CBI has also been given permission to question H.C. Gupta, a former coal secretary and member of the screening committee that allocated the coal blocks, despite initial reluctance from the government. The CBI requires permission from government to question officials above a certain rank. This had been denied but was granted after the opposition accused the government of trying to stonewall the investigation and the CBI threatened to bring the issue to the Supreme Court.
The re-emergence of the scandal comes at a bad time for the government of Manmohan Singh. Already facing public anger over corruption and India’s slowing economic performance, the scandal could overshadow plans to divest 10% of Coal India Ltd (CIL), the state-owned coal miner, which is expected to raise US$ 3.5 billion. It could also further delay deals to increase coal supplies to its chronically coal-starved power plants.
These scandals could also have broader impact on India’s economy and politics: Standard & Poor’s recently warned that the country risks a credit-rating downgrade to junk status if it does not deal with its power shortages. Meanwhile, the next national election will occur in 2014, ensuring that opposition parties will seek to make the most out of these scandals: the BJP, India’s main opposition party, has already called for the resignation of Prime Minister Singh. Such politicking will only increase as the election draws closer.
We include a longer report on the challenges facing India’s power industry in this month’s Power Market Report. Here, Shivanshu Agnihotri considers the challenges facing private power producers and environmental issues in an article that also covers the Chinese power industry. We also include reports on the European and US power industries, as well as a special report on global mercury emissions regulations.
Back in India, the real impact of these scandals will be felt not in the corridors of power but on Main Street. Last year, a collapse in India’s power grid left over 600 million people without power for two days. More seriously, 300 million people still live without any access to electricity. These are the true victims of the corruption and incompetence that mark India’s coal industry. The scandals offer an opportunity for change, an opportunity for India’s politicians to reform and revitalise their country’s slowing economy. Let us hope they take it.