It lies at the heart of the case against former Prime Minister Manmohan Singh, former coal secretary PC Parakh and one of India’s leading industrialists, chairman of Aditya Birla group, Kumar Mangalam Birla. But Talabira III is missing from the list of coal block allocations.

Although the captive coal blocks allotted by the Indian government between 1993 and 2010 stand cancelled, the list of allocations is still available on the coal ministry’s website. Noticeably absent from the list is Talabira III, the coal block that along with its sister block Talabira II, features in the most high-profile of the coal scam cases.

The reason why Talabira III finds no mention in the list is because it was reserved for Coal India Limited, the government-owned mining company. It was not available for allocation. Yet, a private firm, Aditya birla group company, Hindalco Industries, gained partial rights to the coal block.

The extraordinary nature of the allocation has not been emphasized enough in media reports. Whether the allocation was malafide and amounted to a criminal conspiracy is a question that the special court hearing the case will settle. It has summoned Singh, Parakh, Birla and three others on April 8. But it is worth recounting the full sequence of events leading to the allocation that has resulted in court summons to no less than a former Prime Minister.

The case of three blocks

The Talabira coal blocks are part of the IB valley coalfields in Jharsuguda district in western Odisha.

The biggest block, Talabira III, with more than 400 million tonnes of coal, was reserved for the public sector coal company, Mahanadi Coalfields Limited, a subsidiary of Coal India Limited.

The other two blocks, Talabira I and II, with 22.5 million tonnes and 152 million tonnes of coal respectively, were put on the list of captive coal blocks that could be allocated to other companies. A panel of bureaucrats headed by the coal secretary, called the screening committee, took decisions on the allocations.

Talabira I was allocated by the committee in 1994 to Indian Aluminium Company Limited, also called Indal. (It was later acquired by Hindalco Industries.) The coal was meant to be used in a 140 megawatts captive power plant at Hirakud and 50 MW captive power plant at Raigarha.

In addition, Indal (or Hindalco) applied for mining rights to Talabira II. It said it needed the coal for a 750 MW captive power plant which was part of an integrated 3 lakh tonne aluminium plant that it proposed to build in Odisha's Sambalpur district. However, a public sector power generating company Neyveli Lignite Corporation also put in an application. It wanted the coal for a 2000 MW power plant. A third application came from Orissa Sponge Iron Limited, but it was soon sidelined and the other two applications became the main ones.

While the screening committee was deliberating on the merits of both the applications, it was brought to its notice at a meeting held on November 28, 2001, that Talabira II was best mined together with Talabira III. Both the blocks were contiguous and 30 million tonnes of coal that lay at the boundary could get wasted if they were mined separately. Talabira III had already been handed over to Mahanadi Coalfields Limited. In March 2001, MCL had prepared a project report, which got the approval of the government in 2002.

Tussle for Talabira II

While MCL was preparing the ground to mine Talabira III, Hindalco continued to make a bid for Talabira II. At a meeting of the screening committee on 26 May 2003, a representative of the company argued that the mine was a “logical source” for its project.

But the Central Mine Planning and Design Institute weighed against the allocation of Talabira II to Hindalco. At a meeting on June 6, 2003, it said that giving the block to the aluminium company would not be “as per the screening committee guidelines” and also would result in a deficit of 2 million tonnes per annum of Coal India Limited’s production.

NLC asked for Talabira II to be withdrawn from the list of captive coal blocks and reserved for MCL. As a sister concern of MCL, it could access the coal through it.

A final decision on whether the block should be allocated or reserved was deferred.

The crucial year of 2005

On January 10, 2005, the Hindalco representative reiterated in a screening committee meeting that Talabira II was “central to their growth plan”. But the committee reminded him that the projects linked to Talabira I, allotted to the company in1994, were yet to be set up. The company was using the coal from Talabira I in an existing power plant that was also getting coal supplies from MCL through a linkage.

The company reserved comments on Talabira I but reiterated that its power projects would be coming up in 2008 and 2010. To this, the chairman of the screening committee, the then coal secretary, PC Parakh, said, "Compared to other applicants who have already set up their facilities, it was perhaps too early to ask for a block for a project which is planned to be set up in 2010.”

At the same meeting, NLC also presented its case for getting Talabira II: its 2000 MW power project had been granted mega power status by Ministry of Power, an advance action plan had been submitted to Ministry of Coal, the location had been selected, feasibility report prepared, land and water arrangements made, and even the sale of electricity has been tied up for the western region. "If this project is given the coal block, the cheap power would be available to the power grid and various states," said the company's representative, while reminding the committee of its proposal that Talabira II and III could be mined jointly by MCL.

The Ministry of Power backed NLC’s bid. But the Odisha government supported Hindalco. It said the aluminium project "would add maximum value and encourage downstream industries having greater employment generation and beneficial multiplier effect...Moreover, aluminium production is highly energy intensive and very sensitive to the cost of power, and therefore, the captive block becomes a must for the CPP" or captive power plant.

To this, Parakh replied, "Energy intensive processes should be taken up where the power tariffs are lower and energy intensive projects should not be encouraged in places like India where power tariffs are high. Energy intensive part of the aluminium project could be outsourced and only the lesser energy intensive parts of the process should be taken up in India."

The committee also noted that Hindalco's project had already been assured of more than 3 million tonnes of coal per annum through a linkage with MCL. "No separate coal block, therefore, needs to be given for the Aditya Alumimum project," it said.

It decided that Talabira II should be allocated to NLC which could, through a partnership with MCL, jointly mine Talabira II and III, "so that a single large mine can be developed out of these two blocks in the interest of conservation of coal".

This is where the Prime Minister’s Office stepped in.

The Prime Minister's Office

On May 7, 2005, the PMO received a letter from Kumar Mangalam Birla, the chairman of Hindalco Industries, who asked for the allotment of Talabira II for his company's project.

In a note released in October 2013, soon after the CBI filed a FIR against Parakh and Birla, the PMO outlined the events that followed: the letter was acknowledged by the Prime Minister who forwarded it to the coal ministry with a note: “Please get a report from Coal Ministry."

Birla followed up with another letter to the Prime Minister on June 17, 2005. Again, the PMO forwarded the letter to the coal ministry.

The ministry wrote back in August. It gave three reasons for its decision to allocate the block to NLC, instead of Hindalco: Talabira II and III needed to be mined together, NLC and MCL could do so through a joint venture, and Hindalco already had coal linkages from MCL and yet it had failed to use the coal.

In his letter to the PMO, Birla had defended the non-use of the coal linkage. He said the coal was not used because "a bauxite mine lease relating to the aluminium plant had not materialised". He maintained that a coal shortage would keep MCL from being able to supply enough coal for his project in the future. He also pointed out that Odisha government favoured his company over NLC. His observation was soon backed by a letter that the chief minister of Odisha wrote to the Prime Minister in August 2005, supporting the case of Hindalco over NLC. The letter was forwarded by the PMO to the coal ministry, which was asked to re-examine the matter.

On September 16, 2005, nine months after he had outrightly rejected the case of Hindalco for Talabira II, PC Parakh, the coal secretary, resubmitted the file with a proposal that gave Hindalco not only a share in Talabira II but also Talabira III. He proposed that both the blocks be mined together by a joint venture formed between MCL, NLC and Hindalco with shares held in the ratio 70:15:15. A 70% share for MCL in the combined mine would roughly equal the reserves of Talabira III.

But while this met more than 80% of Hindalco's needs, it satisfied less than 30% of NLC's needs. The ministry acknowledged this, and yet argued that NLC could buy the rest of the coal from MCL, disregarding the fact that this would come at a higher cost.

The PMO acknowledged that the correct ratio of allotment between NLC and Hindalco, based on existing guidelines, would be 22.5:7.5 instead of 15:15. But it still recommended a higher ratio for Hindalco to the prime minister, who gave his approval on 10 October 2005.

The case of Mahan

Both PC Parakh and Manmohan Singh have claimed that what swayed the allotment in Hindalco's favour was the letter of the Odisha government. "Under the federal framework of sharing mining rights as provided under the Act, both the Central and State Governments need to concur before an allocatee can be granted a mining lease," the PMO said in the note released in October 2013, soon after the FIR in the case was filed. "Accordingly, the strong recommendation of the Government of Odisha is important and has to be given due consideration while taking a decision in the matter."

But if the concurrence of the state government mattered as much to the central government, it is hard to understand why a part of the Mahan coal block in Madhya Pradesh was also allotted to Hindalco Industries, even though the state government had not backed its proposal.

Initially, the Madhya Pradesh government had asked for Mahan coal block to be allocated to the State Mineral Development Corporation. But in a screening committee meeting on 3 June 2005, it reversed its stand. Stating that it was a "power deficit state", it told the committee that it supported the case of Essar Power Limited. The Ministry of Power backed Essar's case. The screening committee noted the recommendations. But in the final allocation made on April 12, 2006, it split the block between Essar and Hindalco. There is no explanation recorded for the decision in the screening committee minutes.

Unique case

The coal block allocations are replete with such instances of unexplained decisions, which the Supreme Court termed "arbitrary and illegal" in its judgement in 2014. But the case of the Talabira blocks is unique. Ten months after Hindalco's application was rejected by the screening committee, the decision was reversed by the Prime Minister. Two, coal reserves kept aside for the public sector were made available for a private company, without as much as listing the allocation on the ministry website.

Months before the PMO weighed in favour of Hindalco, Mahanadi Coalfields Limited had acquired land to start mining in Talabira III. Land for the project was acquired on 22 March 2005. But before it could be vested in favour of the public sector coal company in November 2005, Hindalco had been given a slice in the pie.

"What's wrong with that?" said PC Parakh, speaking with Scroll on Wednesday. "It was the best that could be done in that situation." In the past, Parakh has maintained that if "If the CBI says I am wrong, the Prime Minister is also wrong.”

Manmohan Singh did not respond to Scroll's email. On Wednesday morning, he told reporters that he was upset but was sure that "the truth will prevail."

In a statement released to the press, Hindalco reiterated that "none of its officials, including its Chairman Kumar Mangalam Birla, have pursued any unlawful or inappropriate means for securing the allocation of the coal block".