CAG, CBI should investigate corruption in Coal India FSAs

Oscar Veldhuijzen, partner, TCI is a strong proponent of pricing natural resources at market prices. TCI, the largest non-promoter shareholder in state-owned Coal India, has been opposing pricing of coal much below market levels by the miner. In an exclusive email interview with N SUNDARESHA SUBRAMANIAN, Veldhuijzen says the latest reports by the Comptroller and Auditor General (CAG) of India has strong parallels to coal being distributed through fuel supply agreements by Coal India.

Do the CAG reports in a way vindicate TCI's position on Coal India all along?

Yes there are strong parallels between ‘Coalgate’ and Coal India selling FSA (Fuel supply agreement) coal at large discounts to market prices. First of all as we stated in our legal petition filed with The High Court of New Delhi, natural resources like coal should be auctioned rather than distributed in an opaque and subjective manner through FSAs. Like with the allocation of coal blocks in the past, at prices far below market levels, it encourages corruption as demand for coal outstrips supply.
 
The government response is largely focussed on hiding behind procedural issues. Are they justified?
 
It is TCI’s intention to fight corruption which will benefit the People of India and all minority shareholders in PSUs. We call upon the CAG and CBI to investigate the corruption related to FSA coal being sold at a significant discount to market levels resulting in corruption as demand outstrips supply.
 
What according to you is the fair system of allocating coal?
 
TCI believes that the whole system of FSAs should be scrapped and, following the law laid down by the Supreme Court of India in many cases including the recent 2G judgment ( Centre for Public Interest Litigation v. Union of India ), a natural resource like coal should be auctioned rather than given through FSAs. TCI also believes that the FSA system of distributing coal has an inbuilt risk of engendering corruption and there are strong parallels between the corruption related to the allocation of the 2G spectrum at a large discount to fair market prices at the time & ‘Coalgate’ – selling coal blocks at a large discount to market – as well as selling FSA coal below market prices.
 
Will the auction system not make these resources expensive for end-users?
 
TCI has always urged CIL to bring the coal prices in sync with the international price. CIL loses $19 billion per annum of pre-tax profits because of artificially low coal prices. Cheap coal is not benefitting the People of India as most benefits are ending up with private companies or mismanaged State Electricity Boards.
 
 What is the way forward?

The way forward is to sell coal blocks and coal at market prices to reduce corruption and make sure that the people of India receive the full benefits. If Indian politicians continue to interfere in an harmful manner it will seriously endanger the future of India as investors won’t invest in India.