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This article was first published 9 years ago  » Business » Exclusive! 'The Modi government refuses to give anything for free'

Exclusive! 'The Modi government refuses to give anything for free'

By Sheela Bhatt
Last updated on: April 20, 2015 08:20 IST
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Coal mining


'The Modi government believes the industrialist, the capitalist, has to pay for the assets of the government which belong to the people of India.'

Coal Minister Piyush Goyal unplugged.

Many historic developments are taking place in India's coal sector.

Sheela Bhatt/ spoke exclusively to Union Coal Minister Piyush Goyal following the government's successful e-auction of coal mines.

Goyal, below, left, who is upwardly mobile since the rise of the Narendra Modi era in the Bharatiya Janata Party, did not duck any questions nor mince his words.

The first of a two-part interview.

You have said the e-auction was conducted in a very different way this time. Reverse bidding was done for end-users of coal who generate electricity which will help them keep bills and the rate of power low.

The coal secretary said the 67 coal blocks auctioned so far have unlocked a total value of Rs 4 lakh crore. Someone is paying the government that money. There are no free lunches in life. So, where will this money be recovered from?

Obviously, somebody will have to pay for the coal. The reality is that we have been able to unlock the value in these coal mines, from businesspersons, who should pay for whatever material they are getting.

There are two types of users of coal -- the regulated and the non-regulated sector. The larger amounts have obviously come from the non-regulated sectors. In the non-regulated sector, the end product is sold -- the price is not determined by any regulator or does not have an impact on the common man or the poor.

It is the product that they market, they export, they sell at market driven prices. When a product is market driven, it should be able to pay for all its raw materials at market prices.

Therefore, we had an e-auction on the forward bidding process where the base price was kept, and on that base price several companies bid and wherever we found that coal mine is of a size, of a nature not suitable for the regulated sector, we auction them to the non-regulated sector. These include steel, aluminium, maybe zinc.

All these products vary depending on market vagaries. Sometimes they may make super profits and sometimes they may make a loss. It evens out over a long period of time. They have to be able to afford to pay for their raw materials. So a larger part of this Rs 4 lakh crore has come from such non-regulated sectors.

More than 50 per cent?

More than 50 per cent.

And if you look at a per ton basis, it might be in the 80:20 or 85:15 ratio. The non-regulated sector has paid more money on a per ton basis.

In the regulated sector, the direct impact of any increase in the price of coal would be felt by the common man.

And as Prime Minister Narendra Modi has articulated very often, this government is working for the last man at the bottom of the pyramid. We have taken care of them.

This government's heart beats for the common man, particularly the 28 crore (280 million) who have been deprived of electricity for 67 years after Independence. Something for which we should hang our heads in shame. The governments of the past, particularly the Congress for 50 years, will have to stand up and take responsibility.

This regulated power sector deserves to get power at affordable prices, at the least cost possible. I think my department and the advisors to the whole auction process -- particularly the Mines and Minerals Trading Corporation and State Bank of India Caps along with ministry of coal officials -- deserve the highest accolades for having devised such a beautiful mechanism, such a transparent mechanism which along with transparency has kept power tariffs under control and even made sure they are reduced.

They took the Coal India price as it exists now for grading. And they asked the bidders to first guarantee Rs 100 per ton to the state where the coal mine is located and the balance price they said, you reverse bid going downwards. And the price you bid would be the pass-through price at which you can sell power to the state distribution companies or the consumers.

And that is done at Coal India's current price rating?

Yes, let us say the Coal India price is Rs 900 (for a certain coal mine) and they pay Rs 100 to let's say Orissa. From the remaining Rs 800, people have to start bidding downwards.

So if one person says I will charge only Rs 200 for passing through the coal on the power price and another says Rs 300, then the bidder who bid at Rs 200 wins because on that price you will have to calculate the power tariff and re-open all the old power tariffs to ensure that this benefit is passed on to the consumers.

That is reverse bidding.

We also saw the situation during the e-auction where this reverse bidding in at least three existing mines, actually went down to zero. And when it became zero -- so for fuel cost they will not charge anything to the power distribution companies -- then there will be a forward bidding after that where from that base of Rs 100 they have to give it to the state, they will have to bid how much more they will give it to the state to be able to get that coal mine.

Many people will ask how can somebody sell coal at zero cost? It is happening because of the failure of the previous government to provide adequate coal to these plants, to increase coal production in this country.

The failure has caused so much of agony and distress that there are many plants which are stranded without coal.

Even the interest they have to pay during construction or the interest to be paid on completion of the plant is so high that they find it better to quote zero fuel cost, but at least recover something out of their standing cost than to sit with idle plants.

Very often they have to import coal. Now they would rather stop that import, charge zero fuel cost coal and bring down their losses than sit idle. So this whole system has been most transparent, appreciated the world over, a real time e-auction.

You could see it -- six million people could see it on their computer screens, on their mobile phones. I would show it to my colleague MPs of different parties including those from Congress, as the auction was happening on my phone, real time and so could you.

I met a few people who know this sector and who have worked within the government. They explained to me that people who are bidding for mines today are power generators who have not signed the Power Purchase Agreements with the discoms.

The bidders have taken this aggressive call, they have accepted your e-auction, they accepted reverse bidding, they have quoted ridiculous prices and they say that when the PPA is signed with the state power distribution companies they will recover the money.

There are two factors. One is fuel cost, which the law and your e-auction conditions controlled. And the other factor is capacity charges -- which is coal handling, washing cost, selling, rejects, middle men, meddling in open markets, port charges, transportation etc... So they say they will recover in that...

Do you think I was born yesterday? Do I not understand this?

Piyush GoyalI know you do that is why I came to you to ask about it.

Good that you came to me because rather than living in an uneducated or uninformed fashion, it is better to ask and clarify. Well, we have very categorically said that the tariff policy will prevail. The Central Electricity Regulatory Commission or whichever is the state regulator verifies transport cost, washery cost, what happens with the meddling.

There are certain standards that the CERC checks, they are allowed only that much of coal rejects and meddling and washing rejects as the CERC has already stipulated for various grades of coal on the basis of fly ash percentages.

So all of these things are already known to everybody and they are factored in. Even when they got these coal mines free (during the United Progressive Alliance's tenure), all of these things were already there.

When the tariff is bid, they will have to tell us what is the capacity charge and what is the fuel charge.

But they hide it. It is very common practice to inflate bills...

Are you alleging that the regulators do not do their job well? Is that what people suggested to you? Would you recommend that we wind up the regulator?

I follow one logic -- there are no free lunches. They are paying you some amount. From where will they recover it?

Did I not just explain it to you? Is there something you have not understood? I will clarify it to you. Because of ten years of misrule and the promise of giving them free mines, which was given for extraneous considerations, now they are paying for having got free mines and having planned investments without adequate coal.

Coal India did not produce coal which the country required. Again because of the mismanagement of the UPA government's policies there are people who are left with plants but no coal and who are willing to forego the coal cost to at least bring down their import cost, their bank loan interest and their standing charges and reduce their losses.

It is a very pathetic situation, but it is caused because of a mismanagement of 10 years.

So you are saying that the entire thing is based on the plight of end users?

Did I ask anyone to bid like this? But if they have bid, they have bid with their eyes open and they all know the rules of the land.

Coming to the broader policy framework of your e-auction. What you have done is not radical in the sense that you are not bringing radical reforms in the coal mining sector. You are not bringing the best of mining technology, the best of miners, instead you have kept some mines marked for people who are in the power sector.

So what has happened automatically is that it has reduced the number of bidders and the bid value as well.

Are you not contradicting yourself? You just told me how there is aggressive bidding and now you are saying I have restricted the bidding value. I suggest you make up your mind what you want to ask!

If I have restricted the bidders and have not got the right price, then your first question was ridiculous. If your first question made sense, then your second question is ridiculous.

I want to tell you that the best policy of allotment of natural resources is more the merrier. What I am saying is that even now, after such a so-called brilliant e-auction policy, the mines are still in the hands of a few people.

Is that so? They are in the hands of the end users, they are in the hands of people in India who manufacture goods, in the hands of power producers, the people who need them most.

And if you think they are so incompetent that they cannot get the best technology to mine that coal, then I think you will have to investigate whether those few hands that you are alleging are capable companies or non capable companies, why did they bid so aggressively?

You tell me...

My opinion is that we have given it in the best interest of the common man. For me, as the Government of India, the interest of the poorest of the poorest is paramount. I have to ensure he gets affordable power, I have to ensure that the country gets power 24/7 for all people, not just you and me, who are the privileged people and still leaving behind 28 crore people -- who still do not get power.

So the logic we have used is that we have to reach cheap, additional low-cost power to the people and not look away at giving these mines to -- in your view what you are trying to suggest the radical view -- into the hands of big mining companies.

The technology...

No, but the technology is available. You and I can go and get technology. I am already in touch with the best companies in the world to bring technology to Coal India which after 40 years of nationalisation, has not got it. And why should the bidders who have won these mines not bring the best of technology? It is openly available in the market.

P Chidambaram wrote a column -- you must have seen it. He says whosoever is winning coal mines in the e-auction will go to the bank and show that they got the allotment at a cheaper rate. The bank will then lend them money.

What will happen eventually is that once the thing progresses, market forces will come into play...

Sheelaji with due respect to Mr Chidambaram...

Have you read that column?

Yes, I have. And if I was not a minister, I would have given a biting response to that. After reading that column I have been wondering about having him as the finance minister for so many years, it is quite obvious why this country is still so behind when he left the government in such a mess. And why the UPA was resoundingly defeated by the people of India. He did not contest the election because he knew he was going to lose badly after having left such a mess behind.

And more so after reading that column, the one thought that came to my mind was that in response someone should have told him... You remember that Sherlock Holmes dialogue 'Elementary, my dear Watson.' I think the illustrious former finance minister needs some elementary training or education on what has happened.

First, he is talking about increasing power prices when you yourself just acknowledged that the reverse bidding process will actually reduce power prices. So I do not know from where he got the concept that power prices will increase.

Second, he talked about somebody having to pay. Obviously, the non-regulated sectors who are getting the benefit of coal, who are getting the benefit of high prices, will pay.

Look at the price of aluminium today, the price of zinc, see the profitability of all these companies.

Should we as the government give away all these mines free of charge as they gave it away and then claim that not a single kilo of coal has come out of the womb of Mother Earth?

Do you remember that statement? (P Chidambaram claimed that since the coal was still in the womb of Mother Nature, there was no loss to anybody.)

We do not do those kinds of false statements. The reality is that coal was being mined, that statement was actually misinformation to the people of India, and mines were given free of charge to profiteer from, to industrialists, to businessmen, who were making power and selling power, who were making steel and cement and aluminium and making huge profits.

The Modi government has refused to give anything for free. The Modi government believes that the industrialist, the capitalist, has to pay for the assets of the government which belong to the people of India.

And the money which they are going to pay will reduce their profit, but it will go to serve the poor of eastern India where all these mines are located, which will go into developing eastern India which even today has a state where power is not available even for two hours a day even though it provides coal for the rest of the country.

It is a pathetic situation that we have inherited, but we are committed to ensure that this money goes to all the coal-bearing states for their development, for the upliftment of the poor people's lives.

It will come out of the pockets of these rich industrialists whom Chidambaram's government had given these coal mines free of charge, illegally, arbitrarily without a process.

PART II OF THE EXCLUSIVE INTERVIEW: Power Minister tells Rediff: '24/7 power in every home by 2019'

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