The great coal robbery: How three Js multiplied their wealth

Is it possible to quantify the benefits to the alleged beneficiaries of the government’s coal block largesse?

Yes. Just use the market capitalisation yardstick.

By that measure, the worth of three influential and politically connected families — Jindals, Jayaswals and Jajodias — have rocketed by a whopping 2500% to 23000% in 10 years starting March 2002.

It cannot be a coincidence that firms owned by these three families bagged 10% of all coal reserves allotted after the captive mining sector was opened to private players in 1993.

Since that year, 195 coal leases were handed to 289 firms (several operating in consortium) with total reserves adding up to 43.35 billion tonnes.

In the allocations, Congress MP Naveen Jindal’s company, Jindal Steel and Power (JSPL), emerged as the biggest beneficiary. It was allocated nine coal blocks with geological reserves of 2.58 billion tonnes or 6% of the total reserves allotted.

Jindal’s brother-in-law Sandeep Jajodia, the promoter of Monnet Ispat and Energy Ltd, was allocated five with geological reserves of 337 million tonnes or 0.78% of the total reserves allotted.

Nagpur-based Jayaswal family that operates two group companies — Jayaswal Neco and Abhijeet Group (that has close links to Congress MP Vijay Darda) — was allocated 10 with geological reserves of 923 million tonnes or 2.13% of the total reserves allotted.

In addition to this, Jindal and Jajodia own equity in other coal blocks that brings up their total share.

Coal block allocations are clearly good money spinners. From March 2002 to March 2012, Monnet Ispat’s market capitalisation rose a staggering 23,638% (from Rs12.6 crore to Rs2,991 crore), JSPL’s increased by 10,763% (from Rs469 crore to Rs50,946) and Jayaswal Neco’s by 2,639% (Rs18.8 crore to Rs515 crore).
JSPL alone had a cash profit of Rs5,578 crore at the end of the last fiscal.

The official portal of the Union government proudly takes note of JSPL’s increase in value. It mentions that JSPL emerged as the second-largest value creator in the world from 2005-2009. The Boston Consulting Group ranked it first among global and mining companies during this period.

However, neither mentioned this was possible mainly because of the generous coal and iron ore blocks JSPL benefited from.
For proof, look at the fortunes of Naveen Jindal’s cousin, Sajjan Jindal, who bagged just two coal blocks to Naveen’s nine.

Between 2005-2012, the market capitalisation of Sajjan’s company JSW Steel surged from Rs4,652 crore to Rs16,100 crore (up just 246%) against 1479% for Naveen’s JSPL (Rs3,225 crore to Rs50,946 crore).

For perspective, now look at navratna public sector undertaking SAIL’s market capitalisation. Investors in the steel behemoth, which was battling to bag new iron and coal blocks, saw their investments rising a meagre 49% from Rs26,000 crore to Rs38,847 crore.

“These meteoric rises are not a reflection of the sweat and blood put up by these entrepreneurs in building their businesses. They are products of favouritism shown by state and central governments by ensuring that they get raw materials free of cost,” said a Nagpur-based sponge iron manufacturer and coal trader who requested not to be named.

“How can a sponge-iron manufacturer based in Nagpur or Raipur compete with Jindals and Jayaswals who have free leases on coal and iron ore mines. Where is the level playing field?” he asked.

Former Jharkhand chief minister Babulal Marandi makes the same point. “What kind of level-playing field you are making when you deny mines to state companies like Coal India Ltd and SAIL and then dole out these precious reserves as freebies to private companies? The government makes a few private companies stronger, but what about the smaller players?”

He alleged both the Congress and the BJP have plundered the nation’s wealth by allotting mines to private companies free of cost.

Private companies that have benefited from government largesse have now become so powerful that it won’t be surprising if they now dictate terms to the government, says Hansraj Ahir, BJP MP from Chandrapur.