The government’s credibility-straining zero loss argument should hopefully have gone out of the window the moment the CBI raids began on coal block allottees. Among the five companies raided was the Hyderabad-based Navbharat Power. The company was allotted 2 coal blocks in Orissa in 2008, and sold out to Essar for Rs 230 crore a year later without developing the block. Essar had to quickly clarify that the sale was perfectly legitimate, which it well may be. Among the many weaknesses of the captive coal policy is that it doesn’t place restrictions on the onward sale of companies that have secured coal blocks. Yes, there are legitimate coal block ‘squatters’ who may be faced with genuine delays in developing their blocks: problems with land acquisition, environmental clearances, hostile/difficult to access locations, cash flow problems and so on. But what about the stampede of overnight operators who rushed in to secure coal blocks? Did the government really assume that gutka makers, stock market traders and politically-backed shell companies really wanted to use the coal to fuel steel and power plants ? Or – as is now evident – did most want to twist the rules to get a block and either cash out, or keep squatting on the block hoping that one day that coal will be de-nationalised, turning their captive block into El Dorado?
Let’s look at the other 4 companies raided. Three of them belong to the Abhijeet Group of the Nagpur-based businessman Manoj Jayaswal, formed in partnership with the Darda brothers, of whom one is an MP, the other a state minister. The group currently holds the dubious distinction of being the second largest ‘squatter’ in the list of private companies allotted coal blocks. Between them and their parent company Jayaswal Neco, they control 10 coal blocks, which contain approximately 970 million tonnes of coal. Only one is in production. How did they pull this off? By floating a number of companies, in one case, two different companies for the same end-use project. Surely, something should have struck a warning bell in the corridors of the coal ministry when the same set of guys come walking through the door but under a different moniker? One day as Abhijeet Infra, the next day as Jas Infra, then as Corporate Ispat, then as JLD Yavatmal, then as AMR Power and Steel. Apparently not. And what is the Group doing with so much unused coal ? It’s impossible to get an answer from the Group’s website, which is a masterpiece of confusing corporate hyperbole. Our estimate, based on simple field check, is that not a single one of their projects has started. When we finally managed to meet one of their managers at their corporate HQ in Nagpur, he was hugely evasive. The sense he gave us was that the end use is not their chairman’s priority. The priority is to acquire coal assets, and figure out what to do with them later. Wow! That’s a new one. Aren’t coal blocks allotted for specific end-use projects ? And de-allocated if those targets aren’t met ? Yes, he said, but no one has time for these details. Everyone is gearing up the big IPO of one of their companies, Abhijeet Power. Now the hyperbole and the chairman’s logic made sense. Imagine how its valuation would soar simply by virtue of its squatting on millions of tonnes of coal even without having spent not very much to develop any of it.
From the same group comes an even more complex ways of monetising a dormant coal asset. One company, Jas Infrastructure, in which the Darda’s and Jayaswals are partners, has an untouched coal block in Jharkhand, and an end use power project in Bihar which has barely taken off the ground. In 2010, the Darda brothers started a company called Asera Banka Power Private Limited, ostensibly to increase their stake in Jas Infra. Asera Banka picks up 7% stake in Jas Infra at Rs 10 per share, a total cost of Rs. 60 crore. To raise the 60 crore, Asera Banka started selling its own shares. But unlike the shares they bought for Rs 10, they sold them at a massive premium of Rs 8,885 per share, earning the Darda’s company Rs 113 crore. The Dardas insist that was a complex but legal transaction to raise money for securing their 7% stake. But even after they pay back Jas Infra, the Dardas will still be left with Rs 40 crore. Not to forget that their company notionally would be worth over a Rs1,000 crore. In his assets declaration submitted to the Rajya Sabha, Vijay Darda has said he owns 74% of Asera Banka, which makes his share worth almost Rs 700 crore. Who would do them such a huge favour of buying shares of a company with no assets at Rs9,000 per share ? Seven shell companies, all registered in fictional addresses in Kolkata. The BJP’s Kirit Somaiya insists these are front companies of the Jayaswals which are paying the Dardas kickbacks as a favour for helping secure coal blocks. That’s not for us to judge. What we can hope for at best is a swift burial to the zero-loss theory, given the number of creative ways of cashing in on coal that is still lying hundreds of feet under the earth.
Sreenivasan Jain is Managing Editor, NDTV.
He anchors the ground reportage show, Truth vs Hype, on NDTV 24x7