'DNA' investigations: Scam of coal blocks sold in black

Unscrupulous businessmen have been minting money at the cost of the industry and the exchequer, thanks to a faulty mining policy, a DNA investigation shows.

Many companies which had got coal blocks at various points of time for setting up iron and steel plants have since sold the allotted blocks for huge gains rather than going ahead with these projects.

A case in point is Nagpur-based BS Ispat, which had planned to construct a sponge iron plant having 50,000 tonne annual capacity at Warora and was allotted the Marki Mangli coal block, with a geological reserve of 34.34 metre, for its captive use.

However, the company’s promoters, Mohan Agarwal, Govind Daga and Nandkishore Sarda, chose to sell out, reaping a Rs160 crore bounty in the process. What’s more; if sources are to be believed, the purchaser also assumed BS Ispat’s liability of around Rs150 crore.

Daga admitted the sale of stake to OCL Iron and Steel Co Ltd. “How can you develop a steel or sponge iron plant without an iron ore block? Since we failed to secure iron ore block, I sold my shares,” he said.

He maintained that the transaction is legally permissible. “BS Ispat is still the owner of the Marki Mangli block. It is only that BS Ispat is owned by OCL and not Daga. That is the only change,” he said.

For the record, Mohan Agarwal was the president of Vidarbha Industries Association (VIA), a Nagpur-based industry lobby, when this block was allotted to BS Ispat in 2001. He was president of VIA for a record seven years while his partner Daga was the president for three years. Significantly, between 2001 and 2007, Agarwal got five coal blocks when he was the VIA president, while Daga got four coal blocks during his three-year term. None of these blocks commenced operations.

“Allotment of blocks to such non-serious players reflects the pitiable state of affairs in Indian mining,” said a mining consultant.

“It seems these powerful industry leaders were lobbying for their own cause rather than industry causes,” said Hansraj Ahir, MP, who had brought the coal scam into public domain in 2009.

Among other instances of allottees selling their mines are those of sponge iron producer Grace Industries and Fieldmining, both, like BS Ispat, based in Nagpur.

Grace Industries sold its stake in the East Lohara coal block to Sunvijay Rolling Industry, promoted by prominent steel trader Sanjay Agarwal, around three years ago for a consideration of Rs144 crore. The block was jointly awarded to Murali Industries and Grace Industries for their captive consumption.

Mukesh Gupta, promoter of Grace Industries, confirmed the deal, saying he was compelled to do so because of poor financial health, led by high debt and cost and time overruns. “I had no money to furnish the bank guarantee and could not get the geological report due to scarcity of fund.” Gupta, however, contested the sale figure saying he only got Rs45 crore and is currently fighting a case against Agarwal in the Company Law Board (CLB). Ironically, this block was recently delisted by the coal ministry.

In the other instance, Anil Taneja, another Nagpur-based industrialist, allegedly sold his company Fieldmining, which was allotted the Chinora coal block in Wardha, to KSK Energy without the consent of his partners Govind Daga and Mohan Agarwal.

Going by sources, the deal fetched Taneja Rs100 crore, but he got involved in a legal tussle with his partners. Taneja admitted he is fighting a legal battle in CLB against his partners but vehemently denied that the block was sold to KSK Energy or some other company.

Taneja runs an earth moving equipment manufacturing dealership in Nagpur and why he needed a coal block in the first place remains a mystery. Taneja wasn’t forthcoming on this.

“I am deeply hurt and concerned that despite raising the issue in Parliament many times, the prime minister has not taken any action. At least now the PMO should come out from its deep slumber and cancel all the blocks allotted during the UPA regime,” said Ahir.

That the industrialists had not applied to the coal ministry for changing the end use made the deals null and void, said Ahir. “If they cannot start the business for which the coal block was allocated, then the ministry has the right to cancel the block.”