Richard Orange investigates endemic corruption, from pilfering and kickbacks to mafia rackets, in the state-owned coal mines that provide almost half of India’s energy needs
The first sign of illicit industry in the West Bengal district of Raniganj is the number of bicycles wobbling precariously down its village tracks, their panniers piled to an improbable height with coal. Then there are bullock carts and the occasional truck, all carrying the same cargo.
At New Kenda Colliery, one of the underground mines owned by Coal India, the state coal monopoly, it becomes obvious where it’s all coming from. A couple of dozen blackened villagers squat over a coal stockpile the size of a football pitch, filling sack after sack by hand as a guard gazes on, his belly poking from his shabby uniform. When the coal thieves see a visitor they scatter, their faces peering out from behind a rusting, broken conveyor belt. But soon they’re back to work. ‘They give money to the guard so he looks away,’ explains Ranjit, an unemployed youth who is showing me around. ‘The ones here who are selling the coal become rich.’
The machinery at New Kenda is so ramshackle that if it wasn’t for the occasional miner trudging past, you would never believe the mine was still operating. Uday Singh, who is supposed to weigh the coal before it leaves the site, has been out of work for a year waiting for the mine’s rail system to be fixed. In what seems like a bad joke, someone has clumsily daubed ‘Regular Maintenance Prevents Accidents’ on a crumbling wall by the main shaft.
Just three hours away by Indian Railways’ air-conditioned Coalfield Express is the office of the man ultimately responsible for New Kenda. Coal India’s chairman, Partha Bhattacharyya, inhabits a very different world — the world of Kolkata’s upmarket Alipore district, where he and his banker wife live; the exclusive world of the Calcutta Club and the Tollyganj Club. As we start the interview, he explains why he’s keen to raise Coal India’s profile.
‘We are the world’s largest coal-mining company,’ he says. ‘The top two Chinese ones taken together are the same as Coal India, so our impact on GDP is quite substantial.’ In fact, Coal India is a central element of economic development here, producing 46 per cent of the energy used by India’s 1.2 billion citizens. The 404 million tonnes of coal it churned out last year is roughly equivalent in energy to the total oil production of Kuwait.
Last year, Bhattacharyya sold his coal at an average of $20 a tonne. ‘This is possibly the cheapest price at which coal sells anywhere in the world,’ he boasts. ‘And yet I made at least $2 billion in profits before tax. Arguably, we are one of the most efficient coal-mining companies in the world.’
But the head of the energy practice at a major international accountancy firm says that this performance reflects the low cost of labour and equipment Coal India enjoys. In fact, its operating costs are at least 50 per cent higher than a private-sector miner might achieve in India. Moreover, the company is failing badly to keep pace with India’s growth. China’s largest coal-mining company, Shenhua Energy, increased its coal export by 17 per cent last year. Coal India’s production grew by just 6.4 per cent.
The daily pilfering at New Kenda is only part of the reason why. According to a former official of Coal India’s anti-corruption wing, the Vigilance Department, theft from New Kenda is just the bottom rung of an institutionalised system of corruption. ‘The problem at Coal India starts from the top,’ he explained to me. ‘Somehow the last half-dozen ministers responsible for coal were very corrupt.’ His allegation is that, before Battacharyya’s time, ministers would fix monthly pay-off targets with certain senior executives of the coal company. ‘The amount depended from minister to minister, but it would run into crores [tens of millions of rupees]. Coal has become one of the main sources by which money is funnelled to the political parties. And that’s the case whichever party is in power.’
My informant estimates that 15 to 20 per cent of Coal India’s real revenues are creamed off somewhere along the chain: for almost every dollar of official profit, another dollar disappears.
Coal India’s ministers can be particularly colourful. Shibu Soren, the first coal minister of the last Congress-led government, was arrested on a charge of tribal- related mass murder dating from 1975, just a few months after his 2004 appointment. Even though Soren and his sons had already gained a reputation for corruption in his home state of Jharkhand, India’s Prime Minister Manmohan Singh still returned him to the post when he was released four months later — the ruling Congress party was simply too reliant on the support of Soren’s JMM party. Soren’s tenure finally ended in 2006 when he became the first sitting Indian minister ever to be found guilty of involvement in a murder (unrelated to the earlier case), though the conviction was later overturned.
Part of the problem is that India’s ‘linkage system’ of coal rationing, combined with a monopoly producer, gives an enormous amount of discretion to the minister concerned. Bhattacharyya explains: ‘This linkage means a sort of a ‘best effort’: unless it is converted into a full supply agreement, there is no contractual binding.’ In other words, a cement plant is eligible for a certain amount of coal, but has no absolute right to receive it. So ministerial diktat can make all the difference. ‘What happens is that the minister says, “he’s my man, give him his coal,” and the company has to do it,’ explains another Coal India executive in Kolkata.
Bhattacharyya himself does not deny the continuing existence of corruption in his company. ‘To the extent that there is corruption in society, the coal sector is a part of the society,’ he admits. ‘I wouldn’t say there is more corruption in coal or less corruption in coal.’
The Indian coal industry’s long history began when Suetonius Grant Heatly opened the first mine back in 1775. It has left a wide stretch of landscape from Raniganj to Dhanbad in the nearby state of Jharkhand pockmarked with hundreds of ageing underground mines. When coal was nationalised in 1973, most were deemed too small or depleted for Coal India to operate, and were officially abandoned. Only they weren’t really abandoned: today almost of all of them are still illegally mined, and the money Coal India officials receive to look the other way forms another of the inputs into the company’s shadow economy.
Watching the bicycles and bullock carts, it’s easy to write off the illegal mining and pilfering as a cottage industry. But Raj Kumar Kayal, President of the Raniganj Chamber of Commerce, says it’s big business. ‘You see cycle-loads and cart-loads going everywhere through our streets,’ he says. ‘From the illegal mines, it goes to a depot, and from there it is distributed all over India.’
Coal India’s inability to meet the needs of much of Indian industry means that the mafia behind the illegal coal trade find ready buyers. ‘We buy directly from the mafia,’ admits the owner of a sponge iron plant in the region. ‘Of course I know who they are. But I won’t name them because they are dangerous people. Five or six of them are very big guys. They are close with the police, and they have friends in the state administration.’
Bhattacharyya is willing to admit that perhaps five million tonnes of coal are illegally mined in India every year, but he argues that it’s difficult to stop. ‘It’s a livelihood issue, 217; he says. ‘You can’t take very drastic steps straight away unless you find an alternative livelihood.’
Coal is also diverted from the mines Coal India runs itself. Some of this, like at New Kenda, is small-time thievery, but according to another Coal India executive, more than 10 per cent of some mines’ production is skimmed off by managers and contractors. ‘For every truck which goes out carrying 12 tonnes,’ he explains, ‘you can be sure that two tonnes extra goes out without being weighed. So in a rake [train consignment] meant to carry 3,500 tonnes, you would actually be carrying 4,000 tonnes.’
‘If you see the hierarchy of a colliery, the flow of authority is not exactly linear,’ he goes on. ‘There are certain people, the weigh-bridge babus [senior clerks] and the loading babus, who carry a lot of clout.’ Most powerful, historically, have been the transport mafia who use their control of the unions to levy extortionate rates for shifting coal from mines to market.
Rivalry between these gangs has sometimes turned bloody — and at the same time, some family members are also active in party politics. Witness the story of Kunti Singh, widow of alleged mafia ‘don’ Suraj Deo Singh. Mrs Singh contested and won local elections for India’s BJP opposition in 2005. In October 2003, Pramod Singh, Kunti Singh’s coal-trader nephew, was gunned down in Dhanbad and her son Rajiv Ranjan disappeared shortly afterwards.
According to the former Vigilance officer, the most common way for Coal India executives to generate funds nowadays is by overpaying for equipment and service contracts, then taking a kickback. ‘It’s not about taking away coal any more,’ he chuckles. ‘That’s a very crude form of doing mischief.’
From time to time, Coal India’s shadow economy comes out into the open. In 2007, the South Eastern Coalfields subsidiary was investigated by India’s Central Vigilance Commission and then by the Central Bureau of Investigation in Delhi after it was claimed that 20,000 tonnes of coal a day was being skimmed off from its most productive mines. The Coal Ministry quashed that investigation at an advanced stage.
N.K. Sharma, Bhattacharyya’s predecessor but one as chairman, was sacked in 2003 when the then coal minister, Karia Munda, unearthed a system of kickbacks and contract over-invoicing for excavation machinery.
The surprisingly good result for the Congress Party in this May’s general election means that Manmohan Singh no longer needs to reward a regional party with the lucrative coal ministry. Instead he appointed a Congress Party stalwart, Sriprakash Jaiswal, who immediately released a barrage of reform plans, proposing to end Coal India’s monopoly, install an independent Coal Regulator and auction off blocks to private-sector mining companies. He also says he aims to try and put an end to the notorious coal mafia. ‘We are in the process of finalising a mechanism to check mafia activities hindering coal production as well as corruption which leads to siphoning off revenue,’ he said in June.
But governments have been trying to do this since the 1980s, when Indira Gandhi gave transport concessions to ex-military officers as a way to try and crush the dons. When Bhattacharyya himself was managing director of Bharat Coking Coal Limited (BCCL), a Coal India subsidiary, he was involved in plans to crack down on the Dhanbad transport mafia. ‘At the time of loading, some extraneous elements used to come in and load bad coal, or load less coal,’ he says. ‘So before a train came to the siding, our Central Industrial Security Force used to be there, and with this action things were controlled — to an extent.’
But Bhattacharyya believes policing can never be entirely successful. An e-auction system he pioneered, first at BCCL and later at Coal India, has worked better, he believes. ‘The second type of mafia operations is to take coal from the linkage system and then sell it on the black market. That portion of coal that they used to grab, we offered that coal through a transparent internet-based system.’
The move brought BCCL into profitability for the first time in Coal India’s 35-year history. Bhattacharyya has since extended the auctions to Coal India as a whole, and in October 2007 he started replacing corruption-prone ‘linkage’ rationing with a ‘New Coal Distribution Policy’, which gives coal users a Fuel Supply Agreement that is enforceable like a standard contract.
Coal India’s other defence against corruption, Bhattacharyya claims, is the Vigilance Department. ‘Action has been taken against some senior officers, where they’ve been found to be indulging in irregularities. Nobody is spared.’
But he hardly seems to take a tough line. He exclaims in surprise when I suggest such irregularities should be a sacking offence. To his mind, even a naming-and-shaming approach would be a step too far. ‘It’s not good idea to publish these things, because we don’t want to further embarrass the fellow,’ he argues. ‘He’s already embarrassed by whatever punitive action has been taken.’
The prospect of a listing for Coal India in the next couple of years may throw some more light onto this murky sector. But a journalist from Kolkata who has long followed the coal industry laughs away the suggestion that Jaiswal will ever actually open up mines fully to private companies. ‘If they say 100 days, it won’t happen in five years,’ she scoffed. ‘These things don’t happen. It is just one of these political statements.’
Add in Bhattacharyya’s softly-softly approach, and it could be some time before Coal India’s tendering is transparent, the mafia is outed, and the roads of Raniganj are free of overloaded bicycles.
Comments