Rs.50,000 crores coal import scam

During the last four years, the Directorate of Revenue Intelligence, or DRI, has unearthed over-invoicing of imports of coal and electricity generation equipment against at least 40 of India’s biggest energy companies. The total scandal amount is Rs 50,000 crore (~$8bn). Of this Rs 30,000 crore is on account of the over-invoicing of coal imported mainly from Indonesia. The remaining Rs. 20,000 crore is due to over-invoicing of power machinery imported mostly from China. The higher costs were passed on to consumers, who paid more for electricity.

• NTPC and various state electricity boards are involved in the over-invoicing scam, along with private companies of Adani, Essar, Anil Ambani etc. 
• As claims of corruption and favouritism emerge involving corporate entities headed by politically influential tycoons and powerful technocrats, the finance ministry's pursuing these cases are being stymied and the prosecution process thwarted.
• The DRI investigation alleged that 40 major companies, including Knowledge Infrastructure Systems Private Limited (KISPL), had inflated the value of coal imported from Indonesia for power generation, resulting in illicit benefits of Rs 30,000 crore. This resulted in consumers having to pay more for electricity. 
• The DRI investigation further claimed that the illegal gains were then laundered through shell companies in tax havens outside India.
• The adjudicating authority of the DRI, has cleared two companies, both part of the Adani Group, of charges of over-invoicing imported power-plant equipment worth Rs 3,974 crore. The investigating agency, DRI, filed an appeal in which it argued that the order suffers from “total non-application of mind or recklessness.”   DRI further stated that the order was “erroneous, illegal and improper not only in law but also on facts.” 
• The adjudicating authority of the DRI has accepted allegations against KISPL regarding over-valuation of coal imports from Indonesia and imposed a penalty of Rs 17.50 crore on the company. It also imposed a penalty of Rs 1.25 crore on Rahul Bhandare, the managing director of the company, and another of Rs 25 lakh on Vipin Mahajan, a former employee of NTPC, who is currently a director of the company. In both cases identical modus operandi was deployed for the over-invoicing and laundering process.
• In the KISPL appeal, a series of procedural irregularities have raised doubts about the integrity of CJ Mathew, the technical member on the bench hearing the KISPL case. The agency claimed that Mathew’s conduct “has been far from fair and impartial.” 
• An adverse ruling by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) in favor of KISPL, would set a precedent that could absolve the larger companies, both government-owned and those in the private sector, of the charges of fleecing the exchequer, and ultimately, the public. 
• The coal was shipped from Indonesian ports, whereas KISPL submitted invoices issued by firms such as Knowledge International Strategy Systems Pte, Singapore and Springs Trader Ltd, Hong Kong. KISPL supplied the imported coal to thermal power stations of the  Mahagenco. The DRI investigation claimed that the Singapore company was a “wholly owned subsidiary” of KISPL
• The Singapore company had created false documents to show that it had imported higher grades of coal. The amounts generated on account of the difference in prices were routed through a shell company based in Hong Kong. 
• The willingness of the finance ministry to fight the case against KISPL and similar cases relating to the over-invoicing of imported coal and power equipment will be tested in the future. It is worth repeating that huge sums of public money worth Rs 50,000 crore are involved.

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Eventhough Modi talked very high about corruption of Congress & UPA and his intent to fight out, during the 2013 campaign and on every public platform, the truth is that he himself is a worst corrupt politician, as reflected by CAG reports during his Gujarat CM tenure. But most Indians doesn't know his Gujarat CM episodes. His lifestyle as PM of India, doesn't make anyone believe that he is simple & honest. His spectacles are estimated to cost over Rs.2 lakhs and changes dress at least 5 times in a day. During his Prime Ministership of last 4 years, hardly any big-shot worthwhile had been booked for corrupt practices, save some hardcore political opponents. In the last year of his five year rule, he is saddled with overall under-performance and very poor financial performance, much can't be expected from him in this regard. Modi is likely to allow almost all ongoing cases disposed off relieving tainted personalities in exchange for election fund favors. Needless to say that BJP's election campaign expenses, during the last 5 years, are unimaginably higher in the country.

Looming coal shortage

Coal meets almost half the energy needs of the entire world. It plays a vital role in steel production and the manufacturing of cement. Coal takes thousands of years to form naturally and are not replaceable at the pace they are consumed. Global coal output is likely to reach a plateau by 2025 and thereafter, it is likely to be on a permanent decline, marking the ‘beginning of end’ of the resource. Depletion of conventional energy resources has made conservation of energy and the identification of new and/or renewable energy sources vital.

THE GLOBAL SCENARIO OF COAL

• Increase in price due to growing gap between demand and supply of coal.
• Dependency on other fuels for the generation of electricity. 
• Many established thermal power generation capacities would face the threat of sitting idle and being underutilized in absence of coal.
• All sectors will have to grapple with increasing power cuts or blackouts, leading to shut downs that would impact their production and margins. 
• A coal shortage can have a ripple effect across industries, which will ultimately reflect in the growth rate of economies.
• In India, thermal power accounts for about 65% of the total electricity generated. India is third-largest producer of coal globally, and yet, is also the fourth-largest importer of coal. India imports 30% of its coal needs of which half by power companies.
• Thermal power plants accounts for 88% of water consumed by all industry sectors put together. They also add to the environmental and social burdens. 
• Coal India Limited, the largest coal producer in the world, has not supplied coal as per commitments to power stations and the gap is widening. Much of the coal produced in the country is of a relatively inferior grade. 
• New laws by exporting countries such as Indonesia and Australia increases the cost of the imported coal for India. As power producers are unable to entirely pass on the costs to the consumers, they face increased pressures on their margins.
• In the light of all this, it is prudent to not rely on any nonrenewable resources including coal. Instead, industries and countries should concentrate on increasing productivity and efficiency of the existing technologies. This will also bring down energy costs with minimal interference in processes. 

LOOMING COAL SHORTAGE

• A surge in electricity demand growth and poor coal production by Coal India threaten to accentuate the fuel crisis. At a time when coal prices are on fire in the overseas market and imported fuel-based gencos are idling, Coal India’s production has set alarm bells jangling. The coal production situation might snowball into a crisis.
• An unexpected rise in demand for thermal power triggered a fuel crisis in July 2017. It was initially attributed to a fall in hydel supplies and stronger growth in demand on the back of the rural electrification push.
• The demand surge caught CIL off-guard. The company was in the process of cutting down production due to sluggish demand for almost two years. Excessive production over the previous two years, when demand was flat, had led to a multi-year-high pit-head stock of 68mt. CIL deployed its pit-head stock to cater to the demand, using the improved railway logistics.
• By end of Dec 2017, supplies started easing out, though stocks at power plants were lower than last year.
• Coal production grew 2.6%, 0.7% and 1.3% in Nov, Dec and Jan respectively, taking the 10-month average to 1.6%. CCL and BCCL, reported 11-13% decline in production.
• At the current monthly average of 53 mt, annual production may only touch 550mt against target of 600mt. With pitheads stocks bottoming out to 33mt, CIL cannot push off-take further without matching production growth.
• Meanwhile, electricity demand grew 5.8% in July, up from 2.6% in FY17 and 4.3% in FY16, with UP, MP, Maharashtra, Telengana and Gujarat being major buyers.
• The result is showing in low fuel stock at power plants. As on Feb 1, 2018,  the average inventory at power plants was 9 day's equivalent against desirable 21 day's.

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Read ... Why we must quit coal

Telangana state (TS) has shortage of 2,000 MW at the time of 'AP Re-organisation' in June 2014. Although some thermal generation has been added in the last 4 years, the increased demand due in Hyderabad city, new lift irrigation schemes, tap water to every household and supplying of 24 hours power to all villages and all agriculture pump sets - the demand has gone up exponentially and is slated to touch 10,000 MW in a year or two. Last two years coal position was extremely good and overall demand for power was subdued and was favorable to TS for purchase power on spot basis at low prices. This year with increase in demand, shortages of coal and imported coal becoming very expensive TS might face not only shortages but also power expenses shooting up and that would be painful and politically disastrous for ruling TRS party. In any case dependence on Thermal power needs to be reduced by making investments in solar power, reduction in consumption by increasing efficiency and eliminating wastage.