New Delhi: The Union government illegally denied West Bengal the right to bid for the 83-million-tonne Sarisatolli coal block in the first auction of coal mine blocks in 2015, reveal documents reviewed by The Reporters’ Collective. This helped a private company collude to rig the auctions of the coal block. When caught in the act by the government’s auditor, the Comptroller and Auditor General (CAG), the government acknowledged West Bengal had been eligible to bid. But, it defended the rigged auctions. 

Though West Bengal has been leading the charge by opposition-ruled states accusing the Narendra Modi-led Union government of financially squeezing them, this evidence proves that a state’s access to resources was subjected to Modi government’s discretionary power from the start. It undermined the Supreme Court’s direction for a fair and competitive auction.

Gamed Auctions

In August 2014, the Supreme Court hit the reset button on a game that it found was being played unfairly. It ruled that the allocation of 204 coal blocks since 1993 to cement, steel and power companies was arbitrary and illegal. The government and its bureaucrats had been giving away coal blocks to private and government-owned companies at their whim and without recovering a fair price for the national asset. There weren’t any competitive bids for determining the fair value of the coal going to be dug up. In addition to cancelling the licences to mine, the court imposed a penalty. It directed that Rs 295 be recovered  as an ‘additional levy’ for every tonne of coal mined so far from these mines. A new Union government had by then taken office promising to right the wrong.

Two months later, the Union government brought in its first ordinance: the Coal Mines Special Provisions Ordinance that laid out two ways to allocate coal blocks. Some blocks will be put up for auction while some others will be directly allocated to government-owned firms. Which mine goes for auction and which gets directly allocated was still based on the government's arbitrary decision. 

What if a company which earlier mined a coal block wanted to bid afresh for that or other mines under the new regime or seek a direct allocation from the Centre of a block? The ordinance said, before bidding for any blocks, it would have to first pay up the additional levy that the Supreme Court had ordered. But, here was a complication.

Government-owned companies that had been allocated the blocks between 1993-2011 would lease them to private miners to dig the coal out. In such a case, was the government-owned company liable to pay the levy or the private company which had eventually mined the block on lease?

The Ordinance did not make it clear. The government realised it soon enough. And within a month of the ordinance deliberations began internally. The Attorney General of India, Mukul Rohatgi was consulted. With his advice, the government decided, if the mine had been leased out to a miner, then the miner would be liable to pay the levy and not the company which had originally been allocated the block.

Coal Ministry’s explanation on who counts as a prior allottee. The word “also”, struck out here, did not make it to the second ordinance.

A second ordinance with this ‘explanation’ was issued on December 26, 2014. The following day, the tender document was released, along with the list of coal mines scheduled for auction.

West Bengal Power Development Corporation Limited (WBPDCL) was one of the companies that applied for auctions of two West Bengal-based mines. One of them was the Sarisatolli coal block. This mine had a reserve of 83 million tonnes of coal reserves and was previously allocated to RP Sanjiv Goenka Group-owned Calcutta Electricity Supply Corporation (CESC) before the apex court cancelled it along with 203 others. The group is a $4bn-revenue conglomerate with interests in power, IT, education, retail and media.

The other block West Bengal Power Development Corporation tried to bid for was the 48.4 Million Tonne Trans Damodar block. Another West Bengal government-owned firm eventually bagged this block in the auctions.

But the Union coal ministry disqualified the corporation on 26 February 2015. The ministry's committee said the firm was disqualified from entering the auctions since it is “a prior allottee and has not deposited such levy within the prescribed time”.

The committee declared the West Bengal government’s corporation was a prior allottee since the firm was allocated five mines that were among the 204 blocks the allocations for which the Supreme Court had found illegal.

This much is true. It had been allocated five mines in the previous regime. But, it had leased all the five to a joint venture with a private company, EMTA Coal Limited. Going by the attorney general’s advice and subsequent second coal ordinance, the private company EMTA Coal Limited was liable to pay the additional levy and not the West Bengal government’s corporation. 

The Union coal ministry's decision ran contrary to the recently promulgated coal mines special provisions’ second ordinance.

Undermining the credibility of the decision, the Coal Ministry did allot six mines to the state corporation through direct allocation route in the same round of auctions. By the Coal ministry’s logic, the corporation should not have been eligible for any of these allocations.

The ministry's decision meant West Bengal Power Development Corporation couldn’t take part in a key auction. And the auction was won by RP Sanjiv Goenka conglomerate, which was later exposed to have rigged the auction process to regain the mining block it had before the court ruling.

The auction raised a stink during the CAG audit.

CAG raised concerns about the coal auction process in its report submitted to Parliament in 2016. It found evidence that RP Sanjiv Goenka Group firms had colluded while bidding for the Sarisatolli mine auction. CAG protocols classify such collusion as ‘rigging’ but the auditor chose to present the modus operandi as a case study, without naming names.  

It did not disclose the name of the mine or the identities of the bidders in the case study. In the auction for this block three of five bidders who had made it to the financial round belonged to the same conglomerate. One of them had in fact bid from the same Internet Protocol (IP) address as that of the parent company, flouting one of the key aspects of a fair auction – bid secrecy.

Though CAG kept the names hidden in its 2016 report, In 2023, The Reporters’ Collective accessed internal audit documents. The skeletons came tumbling out.

Excerpt from the internal correspondence of the CAG.

The case study CAG had presented was for the West Bengal-based Sarisatolli block and the colluding companies were part of the RP Sanjiv Goenka Group, it emerged. The Union government had cut down potential competition for the private company by illegally preventing the West Bengal government from bidding for the block. 

Gov’t (Internally) Admits Wrongdoing

Internally, in 2016, the government did admit that West Bengal was eligible to bid for the block. In a reply to CAG government had said: “When it was clarified that though the prior allottee…was WBPDCL as per Schedule II of the Ordinance, the Mining Lease had been executed in favour of Bengal EMTA Coal Mines Limited and therefore the liability to pay the additional levy did not lie with WBPDCL. WBPDCL was therefore technically qualified for the allotment process.”

Excerpt from the Action Taken Notes of the CAG.

Then, how did the Union government justify denying the West Bengal government its right to bid for the coal block? 

It argued that the auctions were competitive enough even if West Bengal had been illegally denied its rights..

“In case of Sarisatolli coal mine 5 bidders were technically qualified and after opening of the IPO (Initial Price Offer), these 5 bidders qualified for participation in e-auction. The total number of bids submitted in the e-auction of Sarisatolli coal mine was 167.”

“Thus, there was enough competition in the process, despite rejection of WBPDCL,” it argued. “The Audit comments may therefore be dropped,” it added.

The CAG, however, was not convinced and accused the coal ministry of continuing to rely on its half-baked arguments.

“MoC has reiterated their reply to the Audit observation made in the Audit Report and has not given any clarification to the Audit rebuttal to the reply of MoC, as given in the Audit Report,” CAG said. 

Yet, RP Sanjiv Goenka Group continues to hold on to the Sarisatolli coal block. The Coal Ministry has not responded to detailed queries sent by The Reporters’ Collective despite reminders.

Coal ministry issued a statement, calling our investigation baseless. Read our response, fact checking their erroneous statement.