Colgate Scam is the recent coal scandal that happened in the country due to poor allocation of coal blocks. This scam is also called the “Mother of all scams’. CAG report shows that private companies had gain around Rs 1.86 lakh crore from coal blocks that were allocated to them on nomination basis instead of competitive bidding, which amounted to the loss to national exchequer.194 coal blocks were not auctioned between 2004 and 2011 which causes these huge losses. The losses occurred in a way that the coal mined from the coal blocks given away for free could have been sold at a certain price in the market. Since the government gave away the blocks for free, it lost that opportunity. The government gave away 6282.5 million tonne of coal for free. It could have sold it at a price of Rs 295.41 per tonne. One important thing to be noted that while calculating this loss he CAG does not take into account the blocks given away free to government companies. CAG feels that the loss could have been avoided or at least have been lower, as the procedure for auction of the precious natural resource could easily have been put in place in 2006. The failure to do so means that 25 firms including Essar power, Hindalco, Tata steel, Tata power and Jindal steel and power received a windfall through coal blocks on nomination basis, instead of competitive bidding. There was no specific criterion for coal allocation in India till 1993. From 1993 onwards, the ministry of coal started awarding blocks to private parties for the captive mining on recommendations of the inter-Ministerial screenings committee or through direct allocation.
Reason for allocating coal blocks for free
This was done to increase the total coal production in the country. The government-owned Coal India Ltd, which accounts for 80% of the total coal production in the country, hasn’t been able to produce enough to meet the growing energy needs of the country. Between April 1, 2004 and March 31, 2012, the...
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