Coalgate: PM attached priority tag to Hindalco after Birla's second letter

NEW DELHI: A PMO note had told the coal ministry that Prime Minister Manmohan Singh wants industrialist Kumar Mangalam Birla's request for a coal block for Hindalco to be considered "on priority" in view of the likely benefits of the Birla project.

Birla's second letter — two months after his first missive — resulted in a PMO note that was a lot less neutral than Singh's earlier response. It said the PM wanted the Birla case to be pursued on priority in view of the proposal hanging fire and keeping in mind its employment and revenue potential.

Birla's letter in July, 2005, followed an earlier missive in May, 2005, which was acknowledged by the PM who wrote "please get a report from the coal ministry". At the time the PM held charge of the coal portfolio.

A PMO statement on October 19, 2013 — released after the CBI booked Birla and former coal secretary P C Parakh — mentions the second letter with the comment that it was linked to the earlier decision with coal ministry asked for its response.

Interestingly, Odisha chief minister Naveen Patnaik's letter to the PM supporting allocation of the Talabira-II block at Sambalpur dated 17.8.2005, a little after Birla's second letter, says aluminium plants should get higher priority over independent power plants as they generate more employment, create more wealth for the country and directly add to the growth of the manufacturing sector.

In response to the prompt from the PMO, the coal ministry set out the reasons why the steering committee on coal allocations had preferred public sector Neyveli Lignite Corporation (NCL) to Hindalco, pointing to the private firm failing to utilize a previous linkage.

The coal ministry also noted that Birla had met the then coal secretary and explained that linkage was not used as bauxite lease did not materialize.

The options then offered were a joint venture of Mahanadi coalfields Ltd (MCL), Hindalco and Orissa Sponge and Steel Limited (OSIL) or the block being allotted to MCL with Hindalco and OSIL participating for mine operations.

At the stage, MCL meet Hindalco's needs from Talabira-III, keeping in mind that Talabira-II was a fully explored block.

The think in the PMO and the coal ministry seems to have changed after Patnaik's letter. PMO then asked the coal ministry to consider the CM's letter and re-examine the file and then return it to the PM's office.

This then resulted in the coal ministry mooting the proposal to mine Talabira II and III as a single entity with rights to the deposit divided between NLC, MCL and Hindalco.