Tough legal fight awaits Birla group in coal allocation scam trial

Trial court summons Kumar Mangalam Birla as accused in the allocation of Talabira II coal block to Hindalco by the UPA govt

The trial court’s order to summon former prime minister, Manmohan Singh alongwith Kumar Mangalam Birla, Chairman of Aditya Birla group as accused on April 8th in the allocation of Talabira II coal block allocation to Hindalco is all set to result in an unprecedented legal fight. The Birlas will now have to battle it out in the court to prove that no undue favour was given to the Birlas. 

The Hindalco stock reacted negatively as it fell 4.5% to Rs 131 even as gloom descended in the Birla group headquarters in Mumbai. 

Hindalco in a statement said that none of its officials, including its Chairman Kumar Mangalam Birla, have pursued any unlawful or inappropriate means for securing the allocation of the coal block, adding that it will defend its case through the legal process. 

The Birlas had argued the Talabira coal block was allocated to Neyvelli Lignite, Mahanadi Coal and Hindalco in 2005 but till date no work has started at the site. Neyvelli had 70 per cent share of the mine, while Mahanadi and Hindalco have 15 per cent each. All these  allocations were cancelled by the Supreme Court later. 

In October 2013, The  CBI had filed a First Information Report (FIR) against Aditya Birla Group Chairman Kumar Mangalam Birla and Hindalco for “influencing” the government to get the coal block allocated to the company.  According to CBI, the block was first allocated only to a public sector unit in April 2005 but Hindalco received a 15 per cent share in the mine after Birla met the then coal secretary. Though CBI had filed a closure report, the court asked the CBI to re-investigate the case and file a report with it.

Industry sources say Birla had made several representations to the government as any corporation would normally make in such circumstances. Hindalco officials had pointed out that the group has already spent Rs 15,000 crore and provided 10,000 jobs in one of the most backward areas of the country and its unfair to pick up Birla in the case.

The first application for the Talabira-II mine was made by Indal way back in 1996. After the company was acquired by Hindalco in 2000, it was allocated the mine in November 2005. However, no production could start at the site for want of environment clearances.  Birlas had argued that this in itself suggests the industrialist did not get any undue benefits. They added that this is an insult to the government itself if anybody suggests that a single company managed to overturn the decision of the screening committee set up to monitor all mining approvals.

The Aditya Birla Group made the investment decision in Odisha after it was promised low-cost coal and bauxite by the government. However, without access to a coal mine, the project cost will shoot up substantially.

Hindalco is currently now one of the frontrunners in the coal auction and has already bagged Dumri and Kathautia coal mines in Jharkhand, and two mines in Gare Palma in Chhattisgarh.