Editorial: CBI should be careful with its coal inquiries

The Central Bureau of Investigation (CBI) has reportedly filed a first information report (FIR) in its investigation of coal block allocations that names businessman Kumar Mangalam Birla, the chairman of a group of companies that includes metals giant Hindalco, as well as the former secretary in the coal ministry, P C Parakh. As far as can be judged from the information currently available, the agency’s case centres around a late-2005 meeting between Mr Birla, the non-executive chairman of Hindalco, and Mr Parakh, in order to press for the allocation of a coal mine in Jharsuguda district of Odisha to Hindalco.

The CBI has said that, although the block had been set aside by a designated screening committee for public sector companies according to the then provisions – in particular, to Neyveli Lignite – the committee’s recommendations had been overturned, in an “abuse of official position”, to favour Hindalco.

Certainly, investigation of such decisions must proceed. There is every reason to suppose that a close and independent inquiry into a good many decisions in the allocation of coal mines will uncover signs of wrongdoing. On this occasion, the full facts of the CBI’s case are not known. Presumably the CBI has much more than it is currently disclosing; the substance of its case surely cannot be merely that Hindalco received coal that was meant for public sector companies, after asking or lobbying for it.

That argument could appear a little feeble as Hindalco had only a 15 per cent equity in the company with mining rights, with its majority stake belonging to two public sector undertakings. Also, receiving coal meant for public sector companies is hard to construe as an instance of criminality on the part of anyone in government or the private sector. Obviously, Hindalco benefited from the problematic, if long-standing, policy in which captive coal mines were allotted even to companies that did not face controls on the price of their product.

There’s enormous opportunity for arbitrage and rent-seeking. The government has now made amends by introducing legislation to allow auctioning of coal blocks, but its impact has been minimal without a mining regulator in place, for which legislative action is still awaited. Once a regulatory body is set up, the government should hopefully move on with the next step of reforms by denationalising the coal sector.

But the more relevant question now is whether the CBI would have filed an FIR in the absence of a clear indication of quid pro quo for the allocation of the coal block to Hindalco. Sadly, the answer to that question is far from clear. In its recent activity, the CBI has been far from as transparent as the many advocates of its greater institutional independence, including this newspaper, would have liked. It is not sufficient to say that the Supreme Court is monitoring the investigation; the Supreme Court cannot be expected to scrutinise every FIR, especially as the case is ongoing.

In cases such as this – and in its other similar accusations – the CBI must make public as much of its findings as it can without jeopardising its inquiries. If it cannot make a detail public, it should specify why. This is particularly important, given how long the agency takes to move from an informal FIR to a formal charge sheet. In the interim, companies and reputations can be destroyed, dragging an entire economy down with them. Mr Birla, who has been named in the FIR, has an image of rectitude and of being correct in his business dealings. Also, Hindalco, a listed company, has disclosed a great deal of information about the project. The CBI must at least match this level of transparency. This must be the case not just when the object of its investigation are people with hitherto unstained reputations, but as a general rule. Independence from political interference does not mean the absence of regular, sustained oversight, or the freedom to work in the dark.