Tribunal on trial

It has been four years since the National Green Tribunal (NGT) Act was passed by Parliament for effective and expeditious disposal of cases relating to environmental protection and conservation of forests, and also for giving compensation to the victims of environmental damage.

In three-and-a-half years of its existence, NGT has received accolades and appreciation, but has also been criticised for exceeding its jurisdiction and giving "non-technical" judgements. Amid rumours of a likely amendment in the NGT Act by the Union Ministry of Environment,Forests and Climate Change to "clip its wings", it has become important to review NGT's performance

Illustration: Sorit

In the corridors of the Ministry of Environment, Forests and Climate Change (MoEF&CC), growing frustration is evident against NGT. In hushed tones, officials speak about the tribunal’s clamour to get more powers and perks. They call it a “power-hungry institution” that has failed the purpose for which it was created. They talk about unrealistic judgements given by NGT to the ministry and other government departments. They also cite the backlog of cases in NGT as another reason for the institution’s failure to address environmental matters.

In the four years since it was formed, much has transpired between NGT and MoEF&CC. NGT has, in many cases, reprimanded the ministry for being absent during hearings. For a month-and-a-half, at the end of 2013, no counsel from MoEF&CC appeared before NGT. The body fined a few officials from the ministry and went to the extent of cautioning its secretary that he would be compelled to pay heavy costs for cases adjourned without any justification.

The ministry has repeatedly contended that NGT has been overstepping its jurisdiction. In fact, in an affidavit filed before Supreme Court, MoEF&CC’S deputy secretary during the previous regime labelled NGT’S conduct an “embarrassment” to the government in Parliament. The affidavit drew heavy criticism from Supreme Court, which termed it as “nonsense”. The then Solicitor General, Mohan Parasaran, later disowned the affidavit.

Lately, there have been many media reports talking about a likely amendment of the NGT Act, by which the institution was formed, to possibly put a “check” on its powers.

But does NGT need to be reined in or do we need to give it more powers? How has it fared on various counts?

Speedy And Effective

On October 18, 2010, NGT was established under the chairpersonship of Justice Lokeshwar Singh Panta. Its creation was a result of years of deliberation to address environmental issues in India (see ‘How NGT came about’). It sits in five places-Delhi, Bhopal, Pune, Kolkata and Chennai. (See ‘Pendency troubles’)

A fundamental problem facing the judicial system in India is speedy disposal of cases. The problem is even more pronounced where environmental issues are concerned. A study done by the Delhi-based Centre for Science and Environment (CSE) on the status of cases filed by the state pollution control boards showed that as many as 96 per cent, 76 per cent and 55 per cent of cases filed by Chhattisgarh, Odisha and Karnataka boards respectively, were pending in the lower courts.

In the three-and-a-half years since its establishment, NGT has done much better. It had 6,017 cases instituted and 3,458 cases were disposed of—a rate of about 60 per cent, as of August, 2014 (see graphics).

According to lawyer Ritwick Dutta, who is also a member of NGT’s Bar Association, it has been successful in speedy and effective settlement of environmental matters. “When compared to the high courts regarding the handling of environmental matters, NGT has been a much better institution,” says Dutta (see ‘High Courts v NGT’). The high court would normally not earmark more than three hearings in a year for an environmental matter. NGT, on the other hand, is much more regular in scheduling hearings, typically with time gaps of two to three weeks between two consecutive hearings. Perhaps, this promptness in deliberating over cases is reflected in the increasing number of cases being settled by NGT. “This has also created optimism in the community regarding decisions of environmental dispute,” says Sudeip Srivastava, an activist and lawyer from Chhattisgarh.

HIGH COURTS v NGT Before NGT, high courts in different states used to take up important environmental cases, including suomotu ones through "green" Benches. While some, in Tamil Nadu, West Bengal and Karnataka, remain active, others are slowly dying down, as environmental matters now go to NGT. According to environmentalist SubhasDutta, the green Bench is likely to become non-functional in the near future. However, conflicts are brewing between NGT and the high courts. As per the NGT Act, appeals from NGT can only go to the Supreme Court, thus by-passing the high courts. But the Madras High Court has disagreed with this provision. It has stressed that the bar imposed on lower courts by the Act, excluding them from deliberating on environmental cases, does not extend to the high courts. This is because the jurisdiction of a high court under Article 226/227 of the Indian Constitution is part of the Constitution's basic structure. In other words, the court stressed that environmental appeals from NGT had to go to the high court first before going to the apex court. The attitude of other high courts in this matter is not consistent. In June 2014, the Bombay High Court ordered an appeal from NGT be sent to the apex court. The issue is now pending before the Supreme Court for clarification.

Despite the high percentage of cases being disposed of, there is also an increasing backlog of cases in NGT. Till August 31 this year, 2,559 cases-about 40 per cent of all cases-were pending before different Benches of NGT. The pendency was more than 60 per cent in the southern, western and eastern Benches. At the principal Bench, the pendency was about 30 per cent. The pendency indicates both the resources available at different Benches and the number of cases filed. All zonal Benches are handled by just one judicial and one expert member. The principal Bench, however, has four judicial members, including the chairperson, and six expert members.

The number of cases being instituted each year is also increasing phenomenally. The number of cases filed has increased from just 548 in 2012 to 3,116 in 2013 to 2,348 in the first three months of 2014. This has put enormous pressures on NGT. This also reflects an increasing environmental crisis in the country and a growing trust people have in NGT.

NGT targets to dispose of cases within six months. It has been broadly successful in achieving this aim. However, there have been some high profile cases where NGT has not been able to deliver on time.

Activist Ramesh Agrawal from Chhattisgarh, who was recently awarded the Goldman Environment Prize, also called the “Green Nobel”, commented that NGT has not always been able to grant speedy justice. He cited the case of a 2,400 MW power plant in Tamnar, Chhattisgarh, owned by Naveen Jindal, industrialist and former member of Parliament, the environmental clearance of which he had challenged. The case has been with NGT for almost two years now. Another case in point is Singrauli. The case relating to pollution problems in central India’s Singrauli district due to coal mining activities and thermal power plants came under NGT’s scanner in September, 2013, following a petition filed by Ashwani Dubey, a lawyer and resident of Singrauli. NGT has been hearing the case for over a year now. No conclusive judgement has been passed till date, though most past studies have shown that Singrauli is a critically polluted area.

Sudhir Paliwal, of Vidarbha Environment Action Group in Nagpur, thinks that NGT keeps major issues dragging, while hyping up minor ones. “It has not issued any strong orders in major air pollution cases related to power plants or automobile pollution. For instance, a case filed by Mahadula-based social activist RatnadeepRangari where Rangari alleged that the Maharashtra State Power Generation Company (Mahagenco) was flouting coal quality norms, has been dragging for a year without NGT giving any clear order, says Paliwal. However, recently, in a case relating to Diwali crackers, NGT has ordered the setting up of committees to visit cracker manufacturers.”

On sound technical grounds?

NGT is a body composed of judicial and members with expertise in the field of science and environment. It is so because judicial members were not trained to understand the complexities involved in environmental cases due to the nature of questions often raised in the court of law. Lately, questions have been raised about the soundness of judgements passed by NGT. “We have heard that because of judicial heavyweights in NGT, views of technical experts are not being considered,” says an official of the Gujarat Pollution Control Board. A Madhya Pradesh Pollution Control Board official seconds him: “NGT judgements lack in technical aspects”.

However, the above views are not universally accepted. D Stalin of the Mumbai-based NGO ‘Vanashakti’ had filed a petition with NGT regarding pollution in Mumbai’s Ulhasriver. “In September this year, NGT ordered that no sewage or effluents were to be allowed to flow into the drinking water zone of the river and ordered Rs 20 crore to be deposited by the Brihanmumbai Municipal Corporation for sewage treatment plants,” he says. “NGT’s functioning is perfect. Environmental cases are handled very differently by it, based on technical points and points of relevance, not on the submissions of senior counsels who come to court and throw their weight around. The bench is technically competent and does not allow environmental issues to be subverted. They also resolve issues fast,” says Stalin.

NGT’S critics have also questioned the “lack of environmental finesse” of its expert members. “Usually, the expert members are experts of one particular field and not of environment as a whole. For instance, an expert member who has been working on forests for many years would not be able to comprehend the issues arising out of industrial pollution. Thus, the judgements are vague and not relevant in some cases,” says an Odisha Pollution Control Board official.

Many have also questioned some NGT judgements, for instance, the one dealing with the Okhla Bird Sanctuary in Noida. In September 2013, NGT’S principal bench gave an order that stopped all construction within a 10-kilometre (km) radius of the sanctuary because the government had not notified the eco-sensitive zone around it at that time. The order stopped constructions only in Uttar Pradesh, but inexplicably didn’t do so in parts of Delhi which fall within the 10 km radius. Many have criticised the selective and “judicial” nature of this judgement.

Similarly, in a case filed against a coal-based thermal power plant in Cuddalore in Tamil Nadu, NGT first asked the company to undertake a cumulative environmental impact assessment because the plant was being developed in an area where many more industries existed and were planned. But in the next hearing, NGT asked the company to do a “rapid cumulative impact assessment” following the developer’s contention that a comprehensive cumulative impact assessment would take time and delay the project further. A cumulative impact assessment is supposed to be a much more elaborate exercise and by fixing a time limit and terming it “rapid”, this NGT judgement practically set a precedence for ineffective cumulative impact assessments in the future.

But in general, lawyers and petitioners support NGT’S judgements. “NGT is a Constitutional body created for environmental cases alone, with technical members on every bench. This allows cases to be heard on environmental merits as opposed to only legal grounds in any other court,” says Cyriac Kodath, an activist fighting against the Vizhinijam seaport project in Kerala.

An effective deterrent?

More than 50 per cent of the cases filed in NGT relate to green clearances awarded by MoEF&CC to development projects. Cases have been filed, challenging the decisions of the government in awarding clearances and against its conducting public hearings properly. Opinion is divided on how NGT has dealt with cases related to green clearances. Lawyer Dutta says that it has created a deterrence impact and even MoEF&CC is today afraid of it. According to him, for the first time in India, while granting a clearance, the ministry is undertaking extensive deliberations and giving reasons for its decisions. Activist Agrawal thinks otherwise and says that most of the cases are merely being sent back for fresh review by the ministry.

A quick review of the judgements of NGT shows that there have been some cases where clearances have been quashed. These include the clearances to Aranmula Airport Project in Kerala, the coal-based power plant in Chhattisgarh’s Korba district, mining activities in Sacorda, Goa, and the Jindal Gare project in Chhattisgarh. However, in most cases, NGT has asked for fresh review. Often, a review of the entire process of granting a clearance has led to the imposition of additional conditions, which has led to delays and, in some cases, affected the financial viability of projects. Lawyer Srivastava thinks that in cases where NGT is sending projects for re-evaluation, some part of this re-evaluation could be done by the expert members of NGT itself as this will allow the ministry to review the project more seriously.

There have also been cases where industries have been fined heavily on the basis of the “polluter pays” principle. In the case of “Krishan Kant Singh v National Ganga River Basin Authority & Others”, filed by Hapur resident Krishan Kant Singh and environmental NGO Social Action for Forests and Environment (SAFE), the issue of pollution of the river Ganga by Simbhaoli sugar mills and distillery unit and Gopaljee Dairy Pvt Ltd was raised. NGT recognised that the two industrial units had been polluting the river for many years. It directed Simbhaoli to pay Rs 5 crore and Gopaljee Dairy to pay Rs 25 lakh to the Uttar Pradesh Pollution Control Board for restoration of the environment and remedial measures.

Anis Jalal, president, Sagar Shramik Haat Pati Vaalu Utpadak Sahakari Sanstha, a union of manual sand diggers from Maharashtra’s Raigad district, says NGT’s June 2014 judgement banning mechanical sand mining has been a beneficial one for manual sand miners. “Since the judgement, dredgers have stopped operating and manual sand miners are again getting permits for mining,” he says.

NGT has made officials of state pollution control boards wary, too. Says an officer on condition of anonymity: “NGT should be more considerate. It is a tribunal and not a court and pollution boards and other agencies should be given more opportunities to be heard. A tribunal can be a little informal and reasonable, but we’re more scared of NGT than a court.”

But many pollution control board members also seem to support NGT. “It has increased our say in government. Pollution boards’ presence is felt in government now and they realise our importance,” says a Madhya Pradesh official. Agrees an Odisha official: “NGT has definitely improved our position as an organisation. We’re able to give directions to municipalities and treatment plants, with NGT backing us, they also abide.”

Is justice accessible?

NGT may be a fine institution but is its justice available to everybody? This was discussed when the NGT Act was being debated in Parliament in 2010. Many parliamentarians expressed the opinion that as NGT would take over the powers of the lower courts, people would not have local access to justice. This would be most disadvantageous to economically weaker sections of society as they would not be able to use the more than 13,000 district and subordinate courts to address environmental disputes. In Jharkhand’s Chaibasa district, the Bindrai Institute for Research Study and Action (Birsa), along with the Occupation Health and Safety Centre (OHSC), has approached NGT over abandoned asbestos mines at Roro in the same district. The mines were once operated by the Birlas. Puneet Minz, Birsa convener, points out that their role was to make people aware of the harmful effects of asbestos but only activists in metro cities could approach approaching NGT over the issue. “We do not have much knowledge about NGT. For a tribal activist based in a remote location, it is extremely difficult to travel to Kolkata and find accommodation there,” he says. Perhaps the strongest and most simple critique about NGT’s inaccessibility comes from Dayamani Barla, a tribal leader who has led campaigns against displacement and mining. “I do not know about NGT,” she laments. She questions why someone should travel all the way to Kolkata to fight a legal case. “A green tribunal should have been based in a place that has the highest forest cover or large mineral deposit. That is where the dispute is and that is where the extremely poor live,” she says.

Overstepping its brief?

NGT has been accused of overstepping its jurisdiction and taking actions for which it has not been empowered under the NGT Act. Three issues have frequently cropped up. First, does NGT have powers to take cognisance of a matter on its own and take action upon it-the power of suomotu.  Second, can NGT review and direct change in rules and regulations-the power of judicial review. Third, can NGT take up any case which can be termed as “substantial question of environment”.

The NGT Act refers to the scope of NGT’s jurisdiction in Sections 14, 15 and 16. Section 19 states that the tribunal can determine its own procedure and this provision has been used by NGT to include within its ambit issues that the NGT Act does not authorise it to adjudicate upon.

Suomotu powers

In the past, NGT has taken up cases on its own motion (suomotu). In Himachal Pradesh, the tribunal took up issues relating to the adverse impact of heavy and unregulated tourism in the Rohtang Pass area. The tribunal issued a long order with many directions. The ministry had been constantly reminding NGT that taking up suomotu cases is not within its jurisdiction. In India, suomotu jurisdiction is limited to superior courts like the Supreme Court and the high courts. According to ministry officials, NGT in the past has written to them to give it suomotu and contempt power, both of which were denied.

However, Justice Swatanter Kumar, NGT chairperson, maintains, “Suomotu jurisdiction has to be an integral feature of NGT for better and effective functioning. Under the Constitution, high courts also have not been exclusively conferred suomotu jurisdiction. However, they have been exercising the power. There are some inherent powers which are vital for effective functioning and suomotu jurisdiction is one such power” (see interview of Justice Swatanter Kumar)

'NGT must have suomotu powers'   Swatanter KumarJustice Swatanter Kumar has been chairing the National Green Tribunal (NGT) for nearly two years now. In an interview to Down To Earth, he speaks about some basic issues confronting the tribunal   How far do you think NGT has succeeded in fulfilling its mandate of providing speedy justice? NGT has contributed considerably to the mandate of speedy justice in resolving environmental disputes. Our target is to dispose of cases within six months, and NGT has been successful in achieving this target in most cases. The Sterlite case and Meghalaya rat hole mining cases are two examples. NGT has reiterated that Ministry of Environment, Forests and Climate Change (MoEF&CC) is a mere funding body for it. Do you think that MoEF&CC is trying to create hurdles in the working of NGT? No. Over a period of time, MoEF&CC has realised that NGT needs to grow. There has been a substantial leap in the funding directed to NGT. It has increased manifold from Rs 8 crore to Rs 34 crore. The Madras High Court restrained NGT from exercising suomotu jurisdiction. What do you think about it? Suomotu jurisdiction has to be an integral feature of NGT for better and effective functioning of the institution. In the Constitution of India, the high courts also have not been exclusively conferred suomotu jurisdiction. However, the high courts have been exercising the same. There are some inherent powers which are vital for effective functioning and suomotu jurisdiction is one such power.

Rajeev Dhavan, noted Supreme Court lawyer, differs. “A tribunal is a statutory body whose jurisdiction is circumscribed by statute. NGT does not have powers of the high courts or the Supreme Court to strike down legislation or to take suomotu actions. A tribunal cannot enlarge its jurisdiction.”

Sanjay Parikh, Supreme Court lawyer, though wants NGT to have suomotu powers, thinks statutes must be changed for this.

The issue of suomotu jurisdiction, which remained a grey area for quite some time, was addressed by the Madras High Court in early 2014. The court clipped the wings of NGT by passing an interim order which stated that it has no suomotu powers. After this order, NGT has refrained from taking up cases suomoto.

Judicial Review

The ministry has been quite upset with NGT for bestowing upon itself the power of judicial review. NGT has bestowed upon itself a wide ambit of jurisdiction in the name of “ancillary and inherent powers necessary in the interest of justice”. The tribunal held that it is a specialised body and has a procedure of its own (Section 19), which gives it power to adjudicate on issues where judicial review is required.

In a case filed by Pune-based NGO Kalpavriksh (“Kalpavriksh& Others v Union of India & Others”), challenging the qualifications of expert appraisal committee members who recommend environmental clearances for projects under the Environmental Impact Assessment Notification, 2006, NGT invoked the power of judicial review and directed the ministry to revise the qualifications and experience in the notification.

Supreme Court advocate Rajeev Dhavan believes that NGT is trying to acquire the powers of superior courts. “NGT cannot strike down a statute. It can only examine the decisions that are taken and consider if they are in compliance with the three principles laid down in Section 20 of the Act,” he says.

Jurisdiction

Under Section 14(1) NGT is empowered to address all civil cases where a “substantial question relating to environment” is involved. It is alleged that this term is very ambiguous. NGT has, however, construed it very liberally and expanded its jurisdiction. In the Kalpavriksh case, the tribunal commented that the jurisdiction of NGT must be examined in the backdrop of the fact that the protection of environment has been raised to the pedestal of a fundamental right by the Supreme Court (Article 21 of the Constitution). Based on this, the tribunal held that “the jurisdiction of the tribunal is thus, very wide. Once a case has nexus with the environment, the tribunal’s jurisdiction can be invoked. Even cases which have indirect adverse impact on the environment can be considered by the tribunal.” Dhavan, however, thinks that although environment is a part of Article 21 of the constitution, NGT cannot use it to strike down any legislation/order.

With inputs from Sadia Sohail and Srestha Banerjee in New Delhi, Alok Gupta in Patna, Aparna Pallavi in Nagpur and Suchitra M in Kochi

Battle over oil, coal & forests

As India debates how to allocate natural resources, the north-eastern states face a peculiar challenge: communities want recognition of their ownership over coal, forests and oil, the three "nationalised" resources.

These tribal communities have traditionally controlled vast tracts of land and its resources, such as forests and coal, through well-established community institutions. They are now eager to exercise their ownership over oil. The Centre has for long protected their autonomy through various Constitutional provisions. The state governments have acknowledged this. But as the value of natural resources touch an all-time high, the governments turn their eyes to the largely untapped region, perhaps the most resource-rich landscape in the country. The hydrocarbon reserves in Nagaland may increase India's on-shore oil and natural gas production potential by 75 per cent. The coal reserves in Meghalaya are worth 10 times the state's GDP. In Arunachal Pradesh and Mizoram, 60 per cent and 30 per cent of forests are with communities (see map `Centre v state v community'). As the Centre tightens its control over oil, coal and forests, states try to wrest control from it by citing special Constitutional provisions and community rights. With industries on board, the states are also exploiting legal loopholes to hoard benefits from these resources. Communities now find themselves in a quandary. While tribal communities in Nagaland and Meghalaya are protesting and approaching courts to protect their rights over oil and coal, those in Mizoram, Manipur and Arunachal Pradesh are struggling to retain control over their forests.

Kumar Sambhav Shrivastava travels to the region to unravel this fight for resources

 

OIL

On a slippery slope

Nagaland government wrests control of oil resources from the Centre; communities cry foul

Chumtamo Kithan folds a towel and wraps it around his mouth and nose before making his way into a dense patch of grass. The withered tufts of grass on the hill in his village Changpang in Wokha district of Nagaland soon give way to a vast barren land, at places covered with thick dry tar. Hot fumes fill the air. Eyes and skin feel the irritation. “You feel it before you see it,” says Kithan as he walks carefully, avoiding stepping on the sticky soil. A few metres ahead, concrete walls surround abandoned oil rigs. One can hear the bubbling sound coming from behind the walls. Kithan picks up a stick, climbs up the boundary wall and dips it into the crude oil leaking from the rig. “It has turned into a 1.5-metre open oil well,” he says. “These leaking rigs are all we have been left with following our historical struggle to assert rights over the land and natural resources.”

The struggle of Kithan’s tribe, Lotha, dates back to the early 1980s. With the state’s permission, the country’s multinational public sector unit, Oil and Natural Gas Corporation (ONGC), had just begun extracting crude oil from the rigs it had sunk near Changpang. The area is part of Schuppen Belt that is believed to hold 600 million tonnes of crude oil and natural gas. “ONGC over-extracted our oil but gave us very little share in the profits,” alleges Kithan. Irked, the residents of Changpang and adjoining Tsorri formed a union and protested against the oil giant. The Changpang Land Owners’ Union (CLOU) argued that Nagaland enjoys a special status under Article 371-A of the Constitution, which recognises customary rights of communities over land and its resources. The state cannot allow ONGC to exploit the resources without their consent. CLOU demanded that the company should sign a lease agreement with the village council (traditional decision-making body in a village) or Lotha hoho (the apex body of the tribe). The Naga Students’ Federation joined the protest, alleging that ONGC mined 1.02 million tonnes of oil, which is much more than the amount permitted to it in the exploration lease. ONGC shut shop in 1994 following widespread protests and threats from insurgent groups. “It was a watershed event. It was a recognition of Naga people’s rights over natural resources,” says Janbemo Lotha of Green Foundation, a non-profit in Wokha district.

Changpang village in Nagaland is part of an oil belt that is believed to hold 600 million tonnes of oil and natural gas (Photographs: Kumar Sambhav Shrivastava)

But the euphoria did not last long. “Every summer, as the crude oil heats up at those depths, the rigs start leaking. With the first gush of rain, the spilled oil flows down into villages,” says Kithan. The authorities have unsuccessfully tried to contain the spill by constructing concrete walls around the rigs.

In September 2012, People’s Science Institute, a non-profit in Dehradun, found that the groundwater of Changpang contained oil, grease, phenol and iron beyond the standard limits. The oil spill is affecting the soil quality and health of all living beings in the village, the non-profit said in its report. “Many people in the village now suffer from respiratory and skin problems. Crop yields have also taken a hit,” says Chenithung Kithan, another resident of Changpang.

In 2011, a resident of Tsorri and non-profit DICE Foundation in Kohima moved the Gauhati High Court against ONGC and the state. They demanded Rs 1,000 crore in compensation for “four decades of pollution” caused by the oil spill. ONGC hurriedly abandoned the establishment without decommissioning or capping the rigs properly, they said in the petition.

While the fight continues, the state has once again allowed oil mining in the region. This time around, desperate to earn from its vast hydrocarbon reserves, the state has erred on the side of caution.

Ploy against people

The abandoned oil rigs had divided the community of Changpang into two groups: people on whose land rigs were sunk and those who were affected by oil spill. According to DICE Foundation, in 2006 landowners of the rigs signed a deal with SRM Exploration Pvt Ltd, a Gurgaon-based oil company, for tapping the treasure beneath their land. They also obtained 25 years of oil and gas lease from the village council. The Lotha hoho and the Naga hoho (the apex body of all Naga tribes) opposed the deal, saying oil belongs to the entire community and not to a few individuals.

Between 2006 and 2007, the Centre again allotted oil blocks in Nagaland to ONGC. But the company could not proceed due to community opposition.

The Nagaland government seized the opportunity. “Some politicians came to our village and said we tried to trade in oil but messed it up, so now they would do it for us,” recalls Kithan.

In 2009, the state suspended all activities related to oil and annulled previous exploration and mining leases. It formed a Cabinet Sub Committee (CSC) to work out modalities for governing oil and natural gas. But there was another stumbling block. Before Nagaland was formed in 1963, the Centre had introduced the Oil Fields Regulation and Development Act, 1948, and the Petroleum and Natural Gas Rules, 1959, which authorised it to develop and regulate hydrocarbon reserves across the country. States holding the reserve are eligible for a royalty decided by the Centre. Though Article 371-A guarantees that no Central law pertaining to land and its resources applies to Nagaland unless the Assembly ratifies it, the state government did not want to take a chance. In July 2010, it passed a resolution which allowed it to develop petroleum reserves in the state, acquire mineral-bearing areas, set land compensation rates and landowners’ share in the royalty and issue environmental and forest clearance to projects. In 2012, it introduced Nagaland Petroleum and Natural Gas (NPNG) Regulations.

This made the Centre jittery. Worried that it might lose control over the vast reserve of petroleum—Nagaland has the potential to increase India’s onshore oil production potential by 75 per cent—the then petroleum minister M Veerappa Moily wrote letters to then chief minister Neiphiu Rio, opposing NPNG regulations. In June 2013, Moily, on the recommendation of the Union Ministry of Home Affairs, asked Rio to rescind NPNG regulations and withdraw the notification inviting companies for developing the reserves. He said Article 371-A does not confer on the Nagaland Assembly power to make laws related to oil.

This is when in 2011, the then Union petroleum ministry, replying to a Lok Sabha question, had said that “land and its resources” in Article 371-A includes minerals and oil. Speaking at a public meeting, Rio accused the Centre of taking a U-turn on the matter.

The state’s firm stand against the Centre, however, was not primarily meant to benefit communities.

As per the benefit-sharing mechanism of NPNG regulations, for every Rs 100 of crude oil produced, the company will give Rs 16 to the state and the communities. The state will keep 50 per cent of the share, or Rs 8, and pass on Rs 2 to landowners of the rigs. The District Planning and Development Board will get Rs 2 and the remaining Rs 4 will be divided among the community.

A section of Naga communities are opposing this regulation. “It is scientifically wrong to give a higher royalty share to the landowners of rigs,” says Jonas Yanthan, vice-chairperson of the Kohima Lotha hoho. The rig may fall on anybody’s land but the reserves are spread over a vast area. At the most, the landowners of rigs can get a land access fee. Besides, on what basis does the government claim to be the owner of oil along with people and demand the highest royalty share, he asks. “It’s only the caretaker of whatever little land it has acquired for public works,” he adds.

“It is wrong to say that the government has become owner of oil and gas because the (NPNG) rules clearly state that unless the landowner (of the rig) signs the agreement with the selected company, the oil operations cannot take off in any district,” Chief Minister T R Zeliang told Down To Earth (see ‘State has the right to regulate oil and gas’).

T Methna, former president of Students’ Union of Konyak Tribe in Mon district alleges that the government has manipulated some community leaders by giving them roles in the prospective oil trade to extract consent from the owners of land where rigs are. One rule says the government “will request the president of the Naga hoho to obtain consent of the landowners in writing...for undertaking the operations...”

The process of awarding contracts to companies is also dubious. Instead of inviting bids, the NPNG regulations assess a company based on its track record in Nagaland, its experience and how conducive is its financial and operational profile to undertake oil operations. Final selection is simply done by a ministerial group headed by the chief minister. “No technical officer is involved in the selection process,” says an official in the state’s mining department, wondering how the group decides technical aspects of leases.

“While most NPNG rules are flawed, the state did not follow them while awarding contract,” alleges a journalist in Kohima. In February 2014, a little-known Metropolitan Oil and Gas Pvt Ltd (MOGPL) bagged the contract for developing Wokha and Peren oil zones. The Union corporate affairs ministry’s data shows that MOGPL was floated four months before Nagaland invited applications from companies in January 2013.

MOGPL had claimed that its promoters, Spice Energy, SRM Energy and Cals Refineries—all part of one Spice Energy Group according to the Securities and Exchange Board of India (SEBI)—have experiences in oil operations. An investigation by Down To Earth (DTE) reveals a fraudulent history of its promoters.

MOGPL: flawed before conceived

To establish its experience, MOGPL had mentioned in its application that Cals, which holds 91 per cent of its equity, is setting up an oil refinery at Haldia in West Bengal. But Cals has been mired in controversy.

In 2007, Cals issued 7.8 million global depository receipts (GDRs; sets of company shares listed and traded in a foreign country) to generate capital for the Haldia project. The GDRs, worth US $200 million, were immediately subscribed by Honor Finance Ltd owned by Sanjay Malhotra by borrowing US $200 million from a bank in Portugal. Incidentally, Malhotra was a promoter of Spice Energy Group. “This resulted in Cals itself financing its GDRs,” said SEBI in a show-cause notice to the company in September last year. This subscription of all GDRs of Cals through “fraudulent arrangement” pushed the demand for its shares in the Indian stock market, said SEBI. In another deal in 2009, Cals paid US $92 million to a Hong Kong-listed Asia Texx, owned by Gagan Rastogi, son of Cal’s director and Spice Group promoter Deep Kumar Rastogi, for purchasing refinery equipment. While no equipment was delivered, Asia Texx used the money to buy back GDRs of Cals from Honor Finance. Malhotra’s company then used the money to pay back its loan. Following the “unfair trade practices”, SEBI last year banned Cals from issuing equity shares for eight years.

Another Spice Group company and promoter of Cals, SRM Exploration has also been indicted in the GDR forgery case. In March 2012, the Delhi High Court ordered winding up of SRM Exploration while hearing a petition by a Czech company against its financial dealings. SRM Exploration was hired by landowners of rigs in Changpang for exploring oil in 2006.

In September this year, Kohima Lotha hoho moved the Gauhati High Court against Nagaland for selecting MOGPL. Its petition shows the 22 companies that had applied for the contract included experienced firms like Assam Company (India), Prize Petroleum, Deep Industries, Shiv-Vani Oil & Gas and Jubilant Oil & Gas. MOGPL has, however,begun operations in Wokha in July. On September 22, the government announced that MOGPL will start explorations in Peren, home district of chief minister Zeliang.

Vested interest?

In May this year, Zeliang replaced Neiphiu Rio after the former chief minister got elected as Member of Parliament. A politician in the state alleges that Zeliang could win over the support of MLAs against another senior contender for the post because of his involvement in the process of restarting oil trade. As the minister of planning and coordination, Zeliang had played a crucial role in drafting NPNG regulations.

Kyong (Lotha) Students’ Union of Wokha alleges that the state favours MOGPL. “The profile of an adviser with MOGPL, Krishna Kumar M B, shows that he is adviser to Zeliang-rong baudi, apex body of chief minister Zeliang’s community in Nagaland, Assam and Manipur,” says Amos Odyuo, president of the union. Documents with DTE show Kumar is in the management of MOGPL. When DTE contacted Kumar, he admitted his association with Zeliang-rong baudi. “But I do not advise Zeliang-rong baudi anymore because people created unnecessary controversies,” he said. Defending MOGPL’s promoters, Kumar said, “most companies face such legal cases. ”

Next, land targeted for oil

After oil, those in power are eyeing oil-bearing land in the foothills. In March this year, the state prepared a vision document to set up Nagaland Special Development Zones (NSDZs) in these areas. An internal concept note on NSDZ, issued by the chief secretary’s office to deputy district commissioners in November last year, says the idea is to restructure the legal land tenure systems, “that are largely tribal in nature,” to allow “commodification of land as has happened in all other societies...around the world”. At present, the state laws do not allow non-natives to settle in the state. This arrangement aims to protect Nagas from land alienation. Under NSDZ, a system for “permanent settlement of non-Nagas for investment purpose” will be developed. They will also be issued pattas (land titles), according to the note.

“This is a ploy to sell the oil-bearing land to industries,” says a politician in the state. After all, as per the NPNG rules, the owner of the oil-bearing land will get a share in the revenue earned from oil production. The Bharatiya Janata Party-led government at the Centre is yet to clarify its stand on the matter.

`State has the right to regulate oil and gas'   Naga communities say the state is trying to gain control over the vast reserves of oil and gas trapped under their land. In an interview to Down To Earth, Chief Minister T R ZELIANG responds to allegations against himself and the state Community leaders say the state has misused Article 371-A to subvert their rights and exploit oil resources. The special Article safeguards the rights of Naga people as per their customary laws and governs transfer of land and its resources. No Central law can impinge upon these rights without the approval of the state Assembly. So, the Nagaland government has the right to regulate oil and gas by formulating its own Nagaland Petroleum and Natural Gas Rules. There is no question of misusing Article 371-A or subverting communities' rights by formulating the rules. It was prepared after consultations with the apex body of tribes and civil society and following landowners' consent. It is illogical on the part of community leaders to claim the entire revenue from oil exploration without sharing with the state who is their sole guardian. It is said that Metropolitan Oil and Gas Pvt Ltd (MOGPL) that has begun explorations has no experience in the sector. On what basis did you select it? There have been media allegations but no one substantiates those. MOGPL was the only company that offered the highest share of revenue and agreed for agreement with state and landowners of oil-bearing zones. The state plans to restructure landholding regime in oil-rich foothill areas by setting up Nagaland Special Development Zone (NSDZ). It is alleged that by doing so the state is making way for selling the land to outsiders. There is no plan to restructure the landholding system in foothill areas. Though the Assembly has passed a resolution to set up NSDZ, it is still a vision document. More consultations will be held before the final draft is ready. So it is too early to say that permanent settlement will be allowed to investors. Besides, oil and NSDZ are two separate issues. It is said Peren oil zone has been kept out of NSDZ as you own large tracts of land there. I don't have large tracts of oil-bearing land. If NSDZ is implemented, Peren will not be out of it.

 

COAL

A dark truth

Meghalaya government ignores Central mining laws; communities lose coal to mining mafias

Coal dumping yard of mining baron Donush Siangshai in Ladrymbai village, East Jaintia Hills district of MeghalayaRESIDENTS OF Meghalaya’s Umkyrpong village avoid any conversation on coal and forests with strangers. “You come to dorbar shnong (traditional village assembly) and we will tell you everything,” a resident tells Down To Earth.

The 200-odd families in this tiny village in East Jaintia Hills district claim that they own a hill. They had traditionally depended on its 70 hectares (ha) forest for firewood and other produce and grew paddy on parts of it with approval from the village council. In 2010, some people from the village approached the Jaintia Hills Autonomous District Council (ADC) for individual pattas (land titles) over the forest. ADC is a democratically elected body that represents tribal people in states like Meghalaya, governed under the Sixth Schedule of the Constitution. The village council filed a petition requesting the ADC not to issue pattas over community land. The ADC, however, issued pattas over the entire forest to 13 individuals, saying it received a letter from the village council withdrawing its objections.

In response to queries under the Right To Information (RTI) ACT filed by the village council, ADC produced approval letters and receipt of the notice of titles from the village council bearing signatures of its headman and secretary. The village council alleges that the documents were forged. Everybody in the village knows that the then headman Phamles Manar is illiterate. RTI responses revealed that on the same day the titles were issued, the 13 individuals had sold the forest to Donush Siangshai, a coal baron. It did not take much time for Umkyrpong residents to realise that their forest has been grabbed for coal mining.

Umkyrpong village council then moved the High Court of Meghalaya against ADC officials, the 13 land buyers and Siangshai. On May 21 this year, the court termed the landholding certificates illegal.

Unkyrpong is not the only village where coal barons have grabbed community land. The genesis of such conflicts lies in the state’s vast reserves of fine quality coal—576 million tonnes that alone can drive the state’s economy for 10 years—spreading horizontally under the hills in the form of narrow seams. Extracting coal from these seams through open cast mining is economically unviable. This gave birth to an indigenous method, rat-hole mining. People dig up to 50-metre-deep pits on the hills till the coal seam is reached. From there horizontal tunnels are made through which a miner crawls to dig out coal. Till recently, the state and the Centre had exempted such mining from any regulation because of its apparent small-scale nature and the traditional rights of indigenous communities over their land and resources.

Coal mafias and the elites in the community took advantage of this exemption. Coal production in the state increased from 3.3 million tonnes in 1995-96 to about 6 million tonnes in 2009-10, show data based on royalty received by the government. Trade insiders say the actual production could be three times more.

Most people in East Jaintia Hills are farmers. They had stayed away from rat-hole coal mining due to lack of capital and because of its labour-intensive and hazardous nature, according to the Status of Adivasis/Indigenous Peoples (SAIP) Mining Series on Meghalaya, a 2014 report coordinated by a group of scholars working on tribal rights across the country.

“Since the state does not have proper records of land titles or deeds and customary practices, dubious land deals became the order of the day. Community-owned land became easy targets,” says H H Mohrmen, a pastor and environmentalist in Jowai. Individuals and communities selling off land to coal mafias, willingly or unwillingly, is a well-known practice in the state. “In many cases, the miners just buy coal below the land by making a one-time payment and tell the land owners that the top soil belongs to them,” says a Jowai-based journalist. This led to massive conflicts over land in heavily coal-mined areas like East Jaintia Hills.

“Till 10 years ago, it was a peaceful region. Now, it has become a war-zone,” says a police official at Khleriaht police division. Following the orders of the Meghalaya high court, three battalions of police have been deployed inside the forests in coal-bearing areas.

Rat-hole mining had another downside. Earlier this year, the All Dimasa Students’ Union of the adjoining Dima Hasao district of Assam filed a petition before the National Green Tribunal (NGT) that acidic water from the mines and coal dump yards in East Jaintia Hills was polluting rivers downstream. Several studies, including those by government agencies, established this, following which in April this year NGT banned rat-hole mining. It has asked the state to propose a scientific mining plan for coal.

The initial reaction of coal barons and several politicians was that the NGT order infringes on the customary practices of communities. Vincent Pala, an MP from Meghalaya, introduced a private bill in the Lok Sabha in July this year that sought limiting jurisdiction of NGT. Pala argued that the ban on rat-hole mining has jeopardised livelihoods of people.

But the fact is all these years the state government had illegally allowed mining in tribal areas.

Wilful blindness

Unlike Nagaland, where Article 371-A states that national laws concerning land and its resources would not apply to the state unless the Assembly ratifies it, Meghalaya, a Sixth Schedule state, can be exempted from national laws only if the President issues a notification to this effect, says Shilpa Chohan, a Supreme Court lawyer.

But Meghalaya never sought President’s notification. “Without it, all national laws related to mining, environment and labour are applicable to the state,” says Chohan. As per the Coal Nationalisation Act, coal is under the Centre’s control and can be extracted only after receiving mining leases from the state government and forest and environment clearances from the Union Ministry of Environment and Forests. In response to queries under the Right To Information (RTI) Act by Shillong-based non-profit Samrakshan Trust, the state government and Union coal ministry admitted that all national mining laws were applicable in Meghalaya.

While the state kept its eyes shut from regulating mining, it did not use provisions of the Sixth Schedule to protect communities from land alienation by the powerful people and the non-natives nor did it provide them benefits from coal mining. “The income generated from coal mining and its distribution remains highly skewed,” says the SAIP report. Many villages do not have basic facilities like electricity, roads and safe drinking water, it notes.

FORESTS

Losing track

Governments in the Northeast frame policies to subvert community rights over forests. In many cases these policies benefit companies

Communities own and control one-third of the 1.9 million hectares of forest that cover most parts of Mizoram (Photo: Surya Sen)WHAT Coal has done to community forests in Meghalaya, oil palm seems to be doing in Mizoram. Since 2005, the Mizoram government has been implementing an ambitious programme of the Centre, Palm Oil Development Programme (PODP), that aims to catapult India from being an importer of oil palm to being self-sufficient in the wonder crop. After all, oil palm is in demand for everything, right from making vegetable oils and biodiesel to soaps and cosmetics.

While several of the 12 states under PODP struggle to meet the annual targets of oil palm cultivation due to land scarcity and competition from other crops, Mizoram has managed to substantially expand the area under oil palm, at times beyond its annual targets. Of the 101,000 hectares (ha) it plans to bring under the crop, it has already covered 19,000 ha.

What’s striking is most areas brought under oil palms are community forests on which Mizo tribes have practised jhum, a slash-and-burn shifting cultivation. These tribes own and manage at least one-third of the 1.9 million ha of forests in the state. The Sixth Schedule of the Constitution that governs tribal areas in the Northeast is meant to protect their traditional practices. But the state holds jhum responsible for deforestation and land degradation and has been trying to end it since 1980s. With PODP in hand, it has meticulously drafted a policy that will not only help curb jhum but promote oil palm. On the face of it, the New Land Use Policy (NLUP), 2011 aims to provide “sustainable income to farming families...by weaning them away from the destructive and unprofitable shifting cultivation practice.” Under the Centre-funded policy, farmers receive Rs 100,000 as one-time support for giving up jhum and opting for plantations such as cashew, banana and oil palm. High subsidies to oil palm under PODP make it lucrative than the other crops.

By pushing oil palm plantations, Mizoram seems to be effectively abolishing the traditional community forestry management systems, which has been on the wane. Under the systems, the traditional village assembly identifies forest land around the village for jhum and allots it to families for a year. Size of the land depends on the need of the family and its capacity to cultivate. This system ensures that no tribal remains landless. Under NLUP, the government undermines this traditional right of the village assembly and allots patta (land title) to individuals who take up permanent cultivation on jhum land. “In many cases, contractors or businessmen from distant towns bag the land titles,” says an Aizawl-based journalist.

At the same time, the government is creating conducive business environment for palm oil companies. Between 2005 and 2006, it signed memoranda of understanding with Godrej Agrovet Ltd, Ruchi Soya Industries Ltd and Food, Fats & Fertilizers (3F) Ltd for palm oil production. It gave these companies exclusive rights over seven of its eight districts for procuring oil palm from farmers at a fixed price and offered each of them Rs 2.5 crore for setting up oil mills.

“Under this arrangement, even though a tribal farmer grows oil palm on his land, in practice it becomes captive plantation of the company. The arrangement undermines the farmers’ rights to sell the produce in open market,” says T R Shankar Raman of Nature Conservation Foundation, Mysore.

Studies show expansion of oil palm has resulted in social and economic changes in tropical countries, says Umesh Srinivasan of the National Centre for Biological Sciences, Bengaluru. Following an oil palm boom in Ghana in 1970, many non-native farmers leased or purchased community lands by bribing customary chieftains. Community-owned lands in Papua New Guinea are also being sold to people who have no customary birthrights in the region, says Srinivasan. In Indonesia, he adds, conflicts emerged between communities and oil palm companies over unequal benefit sharing and uncertain land tenure.

Monoculture plantations like oil palm can destroy the biodiversity of a region, says Raman, who has studied jhum in Mizoram for a decade. Jhum, though causes temporary deforestation, does not affect the biodiversity as much. “Today major criticism against jhum is that its cycle has reduced from 10-15 years to two to three years, which affects regeneration of forests. Plantations have decreased land availability for jhum, reducing its cycle,” Raman says. Oil palm may be economically rewarding but nobody takes into account ancillary services of jhum. Farmers not only grow rice, maize, vegetables and fruits on jhum farms, they harvest bamboo, bamboo shoots and firewood from the patch during fallow period, Raman informs.

Manipur, Arunachal toe the line

In Manipur, 70 per cent of the forests are traditionally owned and managed by tribal communities. But these community forests are categorised as Unclassified State Forests (USFs) in government records. The government has proposed the New Land Use Policy, 2014, which aims to bring the entire recorded forest area in the state under “undisturbed” forest cover and joint forest management (JFM) without considering the traditional use of the forest land. Under JFM, the forest department ropes in communities for forest management but retains it control over forest.

Taking a step ahead, Arunachal Pradesh is drafting a law that empowers the forest department to bring almost any kind of land, including traditional community forests, under its control.

Traditional community forests account for 60 per cent of the 5.1 million ha of forests in the state. But just like Manipur, Arunachal Pradesh has categorised these forests as USFs and put them in the list of government-controlled forests. To make matters worse, the government is now hammering out the draft Arunachal Pradesh Forest Act, 2014, which will allow any land on which “no person has acquired either permanent heritable and transferable right of use or occupancy under any law for the time being in force” to be converted into “reserved forests”. Since there is no record of customary rights of communities over their forest land, community forests can be considered as “government property” and converted into reserved forests, says tribal rights activist Madhu Sarin. This will restrict activities of communities in their homeland. The proposed law has also provisions for acquiring private land and “waste land” and notifying them as reserved and protected forests. It seems the government intends to bring every category of land under its control, says Sarin. The proposed law bars people from collecting forest produce from USFs. Since, most customary lands have been recorded as USFs, this will imply a major infringement of customary rights, she adds.

The Centre’s Forest Rights Act, 2006, recognises traditional rights of forest communities. But the state has been dragging its feet over implementing the Act. Last year, it informed the Union tribal affairs ministry that FRA does not have much relevance in the state because most of the forests belong to communities whose territories are identified by natural boundaries. Such clarity is missing from the proposed forest law. Following objections by community leaders and academicians, the forest department has constituted two committees to carry out a “wider consultation” on the draft law.

Coal quandary

In a sweeping pronouncement, the Supreme Court has termed all the 218 coal blocks allocated since 1993 illegal. This has raised a fundamental question: how to allocate high-value natural resources in a fair and transparent manner? An analysis by Anupam Chakravartty and Srestha Banerjee

Thinkstock Image

Dirty picture

Fate of 218 coal blocks in limbo; Centre seeks to cancel mines yet to be developed

ON SEPTEMBER 9, the Supreme Court reserved its judgement on the fate of the 218 coal blocks it had declared illegal a fortnight ago.

On August 25, the court pulled up the Centre and declared all allocations between 1993 and 2010 illegal. The “common good and public interest have suffered heavily” because of arbitrary allocation of these coal blocks to private and government companies, said Chief Justice R M Lodha. The apex court was hearing a slew of public interest petitions that contested coal block allocations based on the 2012 report of the Comptroller and Auditor General (CAG) of India, which suggests that illegal allocations of coal blocks to mining companies have caused losses to the tune of Rs 1.86 lakh crore to the exchequer. The court had also held the government responsible for granting largesse to private companies. As many as 106, or about 50 per cent of the coal blocks, have been leased out to private companies. The ruling on August 25 had landed the ruling BharatiyaJanata Party (BJP) in a sticky situation. Just a few months ago the BJP had campaigned against the previous United Progressive Alliance (UPA) government wielding the CAG report. But 39 of the 218 coal block allocations declared illegal, were allocated during the regime of the BJP-led National Democratic Alliance (NDA) between 1998 and 2004 (see ‘Political anatomy of a mega scam’).

On September 9, Union Coal Secretary Akhouri Sanjay Sahay told the court that the government is ready to begin on a “clean slate” with speedy and “transparent” auctioning of the coal blocks because the priority is to deal with the “looming power crisis” in the country. The Ministry of Coal stated that it did not want to form any committee to look into allocations and favoured cancellation of all the coal blocks, except 46.

Political anatomy of a mega scam   Both the Congress- and BJP-led governments at the Centre bent rules to allocate coal blocks to companies     Fall of a national asset From nationalisation to privatisation   1957 Mines and Minerals (Development and Regulation) (MMDR) Act came into being; it placed mines and minerals under the control of the Centre but allowed it to only develop and regulate the mines 1973 Coal Mines Nationalisation (CMN) Act enacted; 711 coal mines were nationalised whose development was vested in the Centre; the rest continued to be operated by private companies 1976 CMN Act amended; mining leases with private lease holders terminated except for iron and steel who were allowed mining for captive use Oct, 1991 The Planning Commission proposed the entry of private entities to develop coal and lignite mines as captive units of power projects Jan, 1992 Cabinet approval sought for allowing private sector participation in captive coal mining operations for power generation and other end uses to be notified from time to time Jul, 1992 Coal ministry set up Screening Committee to implement provisions of captive mining as per the 1976 amendment clauses May, 1993 CMN Act amended to allow private sector participation in coal mining for captive use for purpose of power generation as well as for other captive end uses to be notified from time to time. Coal washery was also included as end use Mar, 1996 Cement included as an end use sector Mar, 1999 NDA government led by BJP allowed captive coal mining companies to sell coal in the open market to keep the surplus stock away from fire 2001 New State Mining Policy came into being; allowed state agencies to mine commercially May, 2003 Electricity Act 2003 brought about electricity reforms but created open and short-term markets for power trading. With no long-term power purchase agreements with distribution companies in place despite coal allocations since 1993, many captive power producers switched to trading in these power exchanges, which led to high tariff Jul, 2004 Idea of competitive bidding to ensure transparency in coal block allocation was proposed Sept, 2010 MMDR Act amended to allow the Centre to set the terms and conditions for the selection of a company through competitive bidding Feb, 2012 Auction by Competitive Bidding of Coal Mines Rules introduced Aug, 2012 CAG report on Performance Audit of Allocation of Coal Blocks and Augmentation of Coal Production tabled in Parliament Aug 25, 2014 Supreme Court declared coal block allocation process between 1993 and 2010 illegal Sept 9, 2014 The court reserved its judgement

Attorney General of India Mukul Rohatgi had sought exemption for these 46 coal blocks—19 were allocated during the NDA regime—from possible revocation of licences on September 1, saying 40 are under production and mining is about to begin in the rest. These coal blocks are with big-ticket private power and steel companies and are estimated to produce 53 million tonnes of coal this year. This is 10 per cent of the total projected output from all the 105 coal blocks with private companies and is sufficient to generate 26,000 MW of electricity and produce 12 million tonnes of steel.

Representing Indian Power Producers’ Association, senior lawyer Harish Salve told the court that individual cases must be considered by a three-member panel comprising a retired Supreme Court judge and an auditor. Rohtagi opposed the idea, saying it will delay coal block allocation. If the Supreme Court cancels all the coal blocks, he said, the government mining company Coal India Ltd should be allowed to take over active mines, or companies be allowed to continue production until the blocks are re-auctioned to ensure supply to power plants.

Photo: Reuters

Prashant Bhushan, a Supreme Court lawyer representing non-profit Common Cause, a petitioner in the coal allocation scam case, says, “For all the noise made by the government, production of coal from the post-1993 allocations is only 7 per cent of the total coal demand in the economy, which is about 739 million tonnes.”

While declaring the coal blocks illegal, the court based its judgement on the presidential reference related to the allocation scam of another natural resource—2G spectrum. In 2012, it cancelled all 122 spectrum licences on the ground of arbitrariness, saying alienation or allocation of natural resources should rely on principles of equality as enshrined under Article 14 of the Constitution, else such executive decisions are arbitrary or capricious (see ‘Behind the blocks’).

Behind the blocks   The first signs of the coal allocation scam started emerging in 2005. Hansraj Ahir, four-time BJP MP from coal-rich Chandrapur district in Maharashtra, wrote to offices of the prime minister and finance minister questioning the basis on which coal blocks were allocated. On November 30, 2009, Madhu Koda was arrested for illegally allotting iron ore and coal mining contracts in Jharkhand when he was the chief minister. It is said Koda and his associates amassed over Rs 4,000 crore by allocating coal blocks. In March 2012, the Comptroller Auditor General (CAG) of India in its draft report accused the government of "inefficient" allocation of coal blocks between 1993 and 2010 and said the block allottees made windfall gains worth Rs 10.7 lakh crore. Then, Ahir and 19 other MPs from Maharashtra, including current Union minister for environment, forest and climate change Prakash Javadekar, submitted a signed petition on coal block allocation in Parliament and to the Central Vigilance Commission (CVC). On May 31, 2012, the CVC ordered a CBI inquiry on the basis of the petition. In August 2012, CAG revised the alleged gains of private parties to Rs 1.86 lakh crore. That year on the basis of the CAG report, Common Cause, led by Prashant Bhushan, filed a petition in the Supreme Court seeking cancellation of the allocation of coal blocks to private companies between 1993 and 2012 to uphold Articles 14 and 21 of the Constitution. These Articles pertain to two fundamental rights that guarantee equality and life and personal liberty to the citizens. On April 23, 2013, a Parliament Standing Committee on coal said coal blocks were distributed between 1993 and 2008 in an unauthorised manner. It recommended cancellation of mines that have not started production. The CBI, on June 11, 2013, registered FIR against Naveen Jindal and Dasari NarayanaRao. On October 16 that year, it filed an FIR against industrialist Kumar Mangalam Birla and former coal secretary P C Parakh. On August 25, 2014, the CBI decided to close its case against Birla and Parakh.

Sanctioned, illegally

More than 65 per cent of the country’s total electricity requirement is met from coal, a non-renewable reserve. Industries like iron, steel and cement also depend on coal as fuel. To ensure equitable distribution of this vital yet limited resource, the government in the 1970s nationalised coal reserves, except a few blocks being mined by iron and steel companies. It also set up the Coal India Ltd (CIL) as the sole authority to develop the reserves and sell the mineral to companies, both public and private. In the 1990s, following economic liberalisation, there was a surge in the demand for coal. So in 1993, the Centre amended the Coal Mines Nationalisation Act, 1976, and allowed private players to develop coal blocks. This is when irregularities started creeping in.

The court has identified two major irregularities in the way coal blocks were allocated. In 1993, the government allowed the Screening Committee, an inter-ministerial body, to award coal blocks to private players. But in the absence of clearly defined evaluation criteria, the committee followed an “ad hoc and casual” policy that was neither consistent nor transparent, the court said. The exercise of allocation denied a level playing field, healthy competition and equitable treatment. This whimsical procedure of allocation had resulted in “unfair distribution of national wealth” to a few private companies, read the judgement (see ‘How Screening Committee allocated coal blocks’).

The apex court has also questioned the authority of the Centre in allocating coal blocks.

The governments of Odisha and Maharashtra, in their submissions to the court, have argued that they have “virtually non-existent” role as the Screening Committee allocates coal blocks without taking their recommendations into consideration. For instance, the committee awarded Kosar Dongergaon coal block in Maharashtra to Chaman Metallics Ltd even though the state government had not recommended it. This contravenes provisions of both the Mines and Minerals Development and Regulation (MMDR) Act, 1957, and the Coal Mines Nationalisation Act, which say that the Centre has the power only to regulate and develop mines and that the leasing process largely stays with the state government. “The allocation letter by the Central government leaves practically nothing for the state government to decide, except to carry out the formality of processing the application and for execution of the lease deed with the beneficiary selected by the Centre,” said the court.

The other irregularity crept in 2001 when the coal ministry introduced New State Coal Mining Policy. The policy allows state government corporations to mine anywhere in the country at a commercial scale to meet the demand of small industries that cannot be catered to by CIL. The apex court has said the policy has “no legal sanction”, however laudable the objective may be, because it violates the Coal Mines Nationalisation Act that prohibits commercial mining by state corporations and restricts transportation of coal by the railways, ensuring that the mined coal is used by industries in isolated pockets.

Sitting idle on black gold

Companies once allocated a coal block are supposed to develop it within the stipulated time period of 42 weeks (for open-caste mining) and 54 weeks for underground mining.But so far, only 46 have been able to develop the mines and another 80 coal blocks have been deallocated as they could not start production within the stipulated time frame. Some of these blocks were allocated more than 14 years ago. Former power secretary E A S Sharma alleges that there was an orchestrated move to benefit some influential private companies so that they can exploit land and coal resources with the help of public money raised by public sector banks. Almost all public sector banks have given big loans to power companies that have bagged coal blocks (see ‘Banks under burden’).This is the reason stocks of several banks tanked shortly after the court termed the coal blocks illegal. Sharma, in a letter to the Reserve Bank of India early this year, says, “There is an impending financial crisis in PSU banks which granted loans to developers of dubious power projects and questionable captive coal blocks.”

According to an estimate by Karvy Stock Broking, wealth management firm in Gurgaon, loans make up a major chunk of the amount power developers have invested in exploring, mining and setting up projects. Since 2006, Indian banks have lent Rs 2.6 lakh crore to iron and steel companies and Rs 5 lakh crore to power companies. While not all of these loans will be at risk, a back-of-the-envelope calculation shows that exposure to the companies with captive coal blocks could be between Rs 2.5 lakh crore and Rs 3.5 lakh crore.

“If these projects fail to take off, banks will have to either write off or classify them as non-performing assets. Even if the court asks the government to reallocate these coal blocks, it would mean substantial delays and would result in slippages and restructuring of loans,” says an analyst with Karvy Stock Broking.

Some projects are already in a fix. A consortium of banks comprising Axis Bank, Punjab National Bank and UCO Bank are trying to find buyers for debt-ridden Corporate Power Ltd (CPL) of Nagpur-based Abhijeet Group, which was allotted five coal blocks but is yet to start production from any of the blocks. In August, the chairperson and managing director of Syndicate Bank, Sudhir Kumar Jain, was arrested for accepting bribe from Chhattisgarh-based Bhushan Steel, implicated in coal allocation scam. The company wanted a loan of Rs 100 crore from the bank. The CBI, which has issued arrest warrant against Bhshan Steel’s managing director Neeraj Singhal for bribing Jain, says the company has taken loans of Rs 40,000 crore from 51 banks. The coal ministry has also issued a showcause notice to Bhushan Steel for not being able to develop four coal blocks allotted to it between 2003 and 2008. Bhushan is yet to file a response.

Companies often cite green clearances as a reason they have not been able to develop mines. An analysis by Down To Earth shows some companies are yet to apply for clearances, while in several other cases, coal blocks are located in areas with dense forest cover where community rights are yet to be settled. Consider this. In 2006, power company Essar and aluminium producer Hindalco were allowed to develop Mahan coal block in Singrauli. The communities challenged the clearances granted to the companies, saying that their rights over Mahan have not been recognised.

Communities of Singrauli, Madhya Pradesh, protest against environmental clearances granted to Mahan coal block. They say their rights over the Mahan forest are yet to be settled

Hopes of cheap power dashed

Though many coal blocks could not be developed within the stipulated time period, the coal ministry kept allocating reserves, mostly to power firms. Between 1993 and 2010, as many as 83 coal blocks were leased out to power companies. This excludes coal blocks allocated for ultra mega power projects (UMPPs) that have been exempted from the case by the Supreme Court. In 2006, the government dereserved another 81 coal blocks with CIL and awarded them to private firms, including power and other infrastructure companies. This was to bridge the gap between demand and domestic supply of coal and to stabilise electricity price, says the coal ministry. But its objective is nowhere closer to being achieved.

In 1999, the NDA government had decided to allow the sale of coal from captive mines saying that surplus coal was hazardous to keep in plant. It intimated its decision through a letter to ASSOCHAM, Sponge Iron Association, FICCI and CII. This gave elbow room to private players, who instead of producing electricity for the grid, started selling coal in the open market.

“Between 2009 and 2012, the coal ministry allowed Tata Steel, Jindal Steel & Power Ltd, Integrated Coal Mining Ltd, Sarda Energy Minerals Ltd and Electrosteel Castings Ltd to sell coal in the market,” says Sudiep Srivastava, a lawyer in Chhattisgarh and petitioner in the coal scam case.

Some independent power producers also procured the surplus coal from captive mines at a cheaper rate and generated electricity to sell it at a whopping Rs 10 to Rs 12 per unit in the short-term open markets such as power exchanges while generation cost did not surpass Rs 2.50 per unit. Power manufacturers are supposed to enter into long-term agreements with power distribution companies (discoms) which brings stability in electricity prices. Captive power producers also sold electricity in these exchanges and charged arbitrary prices, which effectively increased electricity bills for consumers.

Interestingly, the Centre rolled out two policies to facilitate sale of electricity leading to creation of short-term power market. The Electricity Act of 2003, passed by NDA, allowed private players to trade electricity. Then in 2005, the UPA formulated the National Electricity Policy (NEP) which called for creation of power exchanges for power trading. “It was only in 2012, 16 years after coal blocks began to be allocated to private firms, that the companies were asked to participate in power procurement bids called by discoms or their authorised state agencies and enter into long-term power purchase agreement,” says Kalyan Banerjee, Trinamool Congress MP, who led Parliamentary Standing Committee of Coal. Since the entire process of allocation was unauthorised, no one should enjoy the benefit of allocation, said Banerjee, recommending that all the coal blocks allocated to private power companies should be scrapped.