June 07, 2015

Pachhwara Coal Mines: A Tale of Disguised Privatisation,Corporate Malpractice and Exploitation of Adivasi Peasants

Vikas Rawal & Prakash Viplav

IN line with the policies of liberalisation adopted in 1991, successive governments since the early 1990s have sought to subvert nationalisation of coal through disguised privatisation. This has been done in many ways. The mining capacity of public sector coal companies has been severely reduced through retrenchment, incentivising early retirements and imposing controls on recruitment. Consequently, public sector coal companies have been forced to increasingly carry out mining by sub-contracting operations to private contractors. Starting in late 1990s, first under the Vajpayee government and then under the Manmohan Singh government, joint ventures of public sector firms and private companies were allocated coal blocks and given permission to undertake mining, an activity that was hitherto reserved only for the public sector.

In 2002, the Vajpayee government allocated Pachhwara Central coal mines in Amrapara block of Jharkhand’s Pakur district to PANEM Coal Mines Ltd., a joint venture company of Punjab State Electricity Board (later renamed Punjab State Power Corporation Limited, PSPCL) and Eastern Minerals and Trading Agency (EMTA, then a partnership firm owned by Ujjal Upadhyay). Starting in 2006-07, PANEM Coal Mines Ltd. mined and supplied up to eight million tonnes of coal annually to PSPCL, sending roughly six to eight rakes of coal to Punjab every day.

As was the case with most coal block allocations done by the Vajpayee and the Manmohan Singh governments, the PSPCL-EMTA joint venture, in which PSPCL had only a 26 per cent stake, was nothing but a way to bypass the regulation that reserved coal blocks like Pachhwara Central for public sector companies. In fact, official records of PSEB show that PSEB was not planning to apply for allocation of a captive coal block, and did so only at EMTA's bidding and with all expenses for identification of coal block having been borne by EMTA. Although a joint venture, PANEM was completely controlled by EMTA. As per the original agreement between PSEB and EMTA, 23 per cent of the share capital was to be offered to financial institutions, mutual funds and general public. In reality, most of it was held by the family members of the EMTA owners. In 2010, EMTA was converted into a company and registered under the Companies Act, 1956. EMTA, partners of EMTA and their relatives together owned 72.23 per cent of equity of PANEM and exercised full control over its functioning. In March 2015, CAG submitted a report to the Punjab Legislative Assembly pointing to grave irregularities in formation of the joint venture (JV) and subsequent approval by PSPCL of the substitution of the EMTA partnership firm with EMTA Coal Ltd.

There were serious malpractices in day-to-day working of PANEM. The CMD of EMTA also served as Managing Director of PANEM. Mining operations were sub-contracted to EMTA, and EMTA booked excess expenses in accounts of PANEM, which were not verified by PSPCL.

The price of coal paid by PSPCL was not based on cost of production but on the basis of average rates of Coal India Ltd.(CIL). Since Pachhwara Central is an open cast mine, and a very shallow one at that (so shallow that in the area coal can be dug out from just a few feet below the ground), the cost of production should have been much lower. The CAG estimated that in a single year (2013-14), PSPCL paid an excess of Rs 29.59 crore because the price of coal was not based on production cost.

The CAG report summarised its findings in respect of PSPCL as follows: Process for selecting JV partner through tenders were full of ambiguity yet the Company did not consider the desirability of inviting the bids afresh despite expert opinion. Rates for supply of coal were based on CIL rates instead of being based on production cost plus profit. Non-determination of coal price on cost to produce basis resulted in extra payment of Rs 29.59 crore to PANEM/EMTA in respect of grade D coal supplied to PSPCL during 2013-14 alone. The structure of share capital was not followed as per agreement. Partnership firm was allowed to convert into a company and PANEM was allowed to book expenditure incurred by EMTA without verification. The mining operations were sub contracted to EMTA. There was delay in commencement of mining activities; washery and railway siding were not installed by JV partner, EMTA. Supply of entire mined coal as per its quality was not assured. PANEM was not impressed upon to discharge liability for mine closure plan.

Providing about 70 per cent of coal to Punjab's three most crucial power plants (Bhatinda, Ropar and Lehra Mohabbat), PANEM held PSPCL to ransom in 2014 over demands for increasing price of coal and advance payments for freight charges. PANEM curtailed supplies of coal to PSPCL, creating a crisis in Punjab and forcing PSPCL to cut electricity supply. Eventually, PSPCL had to give in to the demands of PANEM, and start paying Rs 6 crore every day as advance towards freight charges and Rs 100 per metric tonne as advance towards price of coal charged by PANEM.

Impact of Mining on Lives

Of Adivasis in Amrapara

Over the nine years of operating Pachhwara Central mines, PANEM dug out vast quantities of mineral wealth from under the ground in Amrapara. Destroying forests, agriculture, and livelihoods of Santhali peasants in the area, coal was fed to power plants in Punjab. Over these nine years, PANEM went emptying mine after mine in the coal block. In some cases, open cast mines were simply abandoned, in which cattle would fall and die. On the side of such mines, PANEM left mountains of overburden and rubble. Of course, at least officially, the plans were to rehabilitate the mines – flattening the accumulated overburden, re-filling the pits removed, and recreating land for agricultural use. In reality, only some open cast mines were re-filled, others just abandoned, and none rehabilitated for any kind of use.

In the meantime, Santhal Adivasis in the area continue to live a life of abject poverty. While coal from beneath their feet lit up Punjab, they continue to burn kerosene lamps to light their little huts. In a village our team visited next to the Pachhwara Central mines, no house had a toilet or drinking water facility on premises. In summer, people had to walk several kilometres to get water, as groundwater table has plunged because of mining. And there was coal dust everywhere – in the air, in their houses, on streets and on road – not only creating enormous hardship but also exposing the local population to diseases like asthma.

Mining created no jobs for the adivasis. With highly mechanised mining, PANEM employees – not only operators of those machines but even the security guards – were all outsiders. The economic gain of Adivasis was limited to scavenging and selling coal that fell on the road as coal-laden trucks left PANEM mines. The organised mafia did a little better, as they occasionally stopped these trucks and offloaded a part of the coal, robbing the robbers.

Farms of Adivasi peasants in the area are repositories of incredible on-farm biodiversity. The land that awaits destruction by mining companies has thickly wooded forests with an enormous diversity of trees. These forests are a crucial resource for Adivasis. Seasonal fruits, vegetables and edible leaves they collect from the forest are an extremely important source of nutrition. Their animals graze in the forest. Firewood they burn in their kitchen is collected from these forests. All of this has been severely reduced because of expanding area of the mines.

Most Adivasis continue to work the small pieces of land that they are left with. However, with no access to bank credit, no public investment in irrigation, no agricultural extension, and little resources to buy modern inputs, agriculture is characterised with low yields, negligible surpluses and meagre incomes. For their cash requirements, most workers -- men and women -- migrate to West Bengal to work as agricultural labourers, transplanting or harvesting paddy for meagre wages, or to work in brick kilns,  stacking unburnt bricks in the kilns and removing them after they have been burnt.

Cancellation of Allotment to PANEM

In September 2014, the Supreme Court ordered cancellation of allotment of 204 blocks, calling the process of allotment "fatally flawed". The Supreme Court allowed original allottees in mines like Pachhwara Central, where mining had been going on, to continue mining for six months, until March 31, to avoid disruption of power generation and facilitate continuation as fresh allotments are done by the government.

PANEM mined every single tonne of coal that it could till March 31, 2015, and then left the mine exposed without taking any precaution for safety of mines or of poor adivasis living in villages around the mines. On March 31, PANEM handed over charge to PSPCL.

While formally, the mine was handed over to it, PSPCL had no capacity to ensure safety of the mine. Security staff deputed by PANEM continue to regulate entry to the mine area. PANEM continues to have its staff there, who are instructed to just stand by and wait for further instructions.

With formal handing over of the mine to PSPCL, all mining activity was halted and all mines were left as they were: With coal exposed to atmospheric heat, open pits in which stray cattle would fall to their death, and mountains of overburden.

When PANEM handed over the mine, it took no precautions to ensure safety of exposed coal. Freshly mined and exposed coal absorbs oxygen quickly. Coal heats particularly quickly in present of atmospheric moisture and self-ignites.

In early May, with sporadic rains causing a rise in atmospheric moisture and soaring summer temperatures, exposed coal in the mine caught fire. When we visited the area, the entire mine was a spectacle of fire and rising clouds of smoke.

Over the last few weeks, precious coal is burning in Pachhwara Central mines. Not having being paid to do anything about it, PANEM/EMTA has decided to just watch the coal burn and do nothing other than preventing entry to the area (security staff of PANEM continue to guard the entrance to the mine). PANEM officials have been saying that unless fires were not put out quickly, they could spread to the entire mine as well as to neighbouring mines.

Re-allotment of Pacchwara

Central Coal Mines to PSPCL

When coal block allotment was cancelled, the Supreme Court imposed an additional levy of Rs 295 per tonne of coal mined. For about 49 million tonnes of coal that had been mined from the Pachhwara Central mines, the compensation was estimated to be about Rs 1,460 crore. Despite the Supreme Court's direction that the additional levy be paid within a period of three months and in no case later than December 31, 2014, EMTA refused to pay its share of the compensation. PSPCL paid its share (26 per cent, equivalent to the equity it held in PANEM) of Rs 391 crore, only to avoid being disqualified from bidding for fresh allotment of Pachhwara Central coal block.

In the latest round of allotments, Pachhwara Central was reserved for allotment only to public sector. Having paid just their share of levy, and despite the fact that bulk of the levy had not been paid because of EMTA's refusal to abide by the Supreme Court's instructions, PSCPL applied for and was awarded the contract for mining coal from the Pachhwara Central mines.

At the face of it, the new allotment has been done to a public sector entity, PSPCL. In reality, however, since the mine has been allotted to an entity that has no capacity or experience of coal mining, PSPCL can only operate the mine by sub-contracting the operations to a private mining contractor.

According to reports, PSPCL is negotiating with EMTA to sub-contract mining operations. These negotiations are happening in the context that EMTA has existing capacity in Pachhwara Central – machinery, buildings, personnel – to start the mining activity sooner than any other competitor can. This clearly gives EMTA a huge advantage over other competitors. With a huge demand for electricity to cater to, PSPCL has little choice but to pay a hefty price to EMTA to restart mining.

The urgency of dealing with fires has put further pressure on PSPCL to quickly clinch the deal with EMTA, even if it is on terms dictated by EMTA, to restart the operations in the mine.

The latest news from Amrapara is that PSPCL and PANEM have agreed that the latter will put out the fires, and that the former will bear the cost for doing so. In a statement issued by PSPCL team that recently visited Pachhwara, the mining operations, presumably by EMTA/PANEM, will start as early as June 1.

The facade that was created in the name of PANEM is not needed any more. PSPCL can directly enter into a contract with EMTA. If that happens, nothing would change on the ground. Mining would start as before. EMTA would continue to manage the entire operations as before despite having defaulted on payment of over Rs 1,000 crore worth of levy that the Supreme Court mandated it to pay. With no capacity to oversee operations in Pachhwara, and with huge unmet demand for electricity and public pressure to worry about, PSPCL would have no choice but to succumb to armtwisting by EMTA.

Modi Govt's Policy on Coal

In his speech in Mathura, marking a year of the NDA government, Prime Minister Narendra Modi boasted that his government had brought an end to the "loot" of coal allowed by the Manmohan Singh government. He claimed that the new policy would result in a part of benefits from mining going back for development of adivasis in the areas where mining was going to take place.

Nothing could be farther from truth. Since the early 1990s, both the Congress- and the BJP-led governments have pursued policies for surreptitious and incremental privatisation of coal mining. Pachhwara Coal Mine, one of the biggest coal blocks available for allotment in Jharkhand, has been allotted to PSPCL for free. The mining operations in that mine are going to be sub-contracted to the same company that was managing the operations before. This is happening despite the fact that EMTA has defaulted on payment of over Rs 1,000 crore of levy. The company would have complete control over operations in Pachhwara as PSPCL has no capacity to manage mining operations.

Nationalisation of coal has been subverted and privatisation has been promoted through various means by Congress- and BJP-led governments over the last two decades. As on most economic issues, the Modi government's policies on coal are nothing but old wine in new bottle. In the domain of economic policies, everything that was wrong with the Manmohan Singh regime has been taken one step further by the Modi government – giving even greater benefits to India Inc., pushing people completely out of the development scene, attacking marginalised communities, and smartly repackaging it all to give it legal legitimacy.

Policy Issues and Demands

Mineral wealth under the land of adivasis belongs to them. Rights of these adivasis over land and these minerals must be recognised. Any attempt to rob the rightful owners of this wealth must be defeated. Mineral resources cannot be mined without the consent of Adivasis, without fully compensating them, and without ensuring that a reasonable share of benefits from the use of this wealth goes back to them. This is the fundamental principle on which policies related to coal and other minerals have to be based.

Government policies on coal mining require a major course correction. Such a course correction has to involve the following:

Reversal of privatisation: It is crucial that public control over coal and other mineral resources is re-established fully, privatisation in all forms is reversed, and coal mining brought back fully in control of the public sector mining companies.

Using coal and other minerals for industrialisation of mineral-rich states: Coal from states like Jharkhand is mined, transported to various states, and fed to power plants in these states. It should be required that power generation companies invest in power plants in states where coal is mined, and generate power that can then be sold to power distributors in other states. Such investment would fuel industrialisation in these mineral-rich states, generate employment, and provide at least a part of the electricity generated to people of that state. Transporting coal and other minerals from mineral rich states to industrially advanced states instead of investing in in-situ generation of electricity and other mineral-based industries is nothing but a recipe for de-industrialisation in mineral-rich states.

Protecting the rights of Adivasis and using mineral resources for their development: The question of the impact of mining on conditions of life and livelihoods of villages in the mining area remains crucial. It is completely unacceptable that power generated from this coal is only used for air-conditioning corporate offices and homes of the urban rich, while poor Adivasis who have the first natural claim on these resources light kerosene lamps in their huts.

In the context of Pachhwara Coal Mines, following immediate actions are required:

PANEM/EMTA should be made to extinguish the fire at their own cost, and take the responsibility of mine safety for a reasonably specified period.

PANEM/EMTA should be made to pay their share of levy as determined by the Supreme Court.

In addition, PANEM/EMTA should be made to pay for rehabilitation of the mines from which they have extracted coal for the last nine years.