India Coalgate controversy: police raid mining firms for alleged corruption in the allocation of coalfields

Indian police are carrying out raids across 10 cities as part of an investigation into alleged corruption in the allocation of coalfields.

Police say they are searching the premises of five companies, which allegedly misrepresented facts prior to being allocated the coalfields.

Indian government officials and company employees are also under investigation.

Government auditors recently said India lost $33 billion selling coalfields cheaply between 2006 and 2009.

The raids come as the government rejected opposition demands to cancel the sale of the coalfields.

Parliament has been deadlocked over demands by the opposition Bharatiya Janata Party (BJP) that the government should cancel the sale and order an independent probe into the matter.

Although the report by government auditors does not mention Prime Minister Manmohan Singh, BJP leaders say he must step down as he was heading the coal ministry at the time of the sale.

Manmohan Singh denies any wrongdoing and has refused to quit.

On Tuesday morning, India’s Central Bureau of Investigation (CBI) registered five cases for alleged cheating against five companies, various individuals and officials and began conducting raids at 30 locations.

Raids were being carried out in Delhi, Mumbai, Calcutta, Patna, Hyderabad and several other cities, a CBI spokesperson said.

Officials say the CBI inquiry began before the government auditors report came out last month.

At the heart of the CBI’s investigation is the allegation that some of the companies were set up only to obtain the coalfields being allocated by the government and then sell them off at profit. Media reports allege that the companies involved misrepresented their ability to mine the coal.

The auditors report said that of the 86 coal blocks, which were to produce coal by 2010-11, “only 28 blocks (including 15 allocated to the private sector) started production as of 31 March 2011”.

But correspondents say the timing of the raids suggests the beleaguered government is eager to be seen to be doing something about an increasingly controversial sale.

Over the weekend the BJP – which has dubbed the controversy “coalgate” – said it would only allow parliament to function if the government cancelled the sales of 142 coal blocks and ordered a probe.

But the government has not relented to those demands and has said that it is looking into the matter.

“The demand for cancellation of all 142 coal blocks… is not founded on sound logic… It [cancellation] cannot be done through diktat or arbitrary orders,” Finance Minister P Chidambaram said on Monday.

“There is a procedure for it and that procedure is under way,” he said.

India is one of the largest producers of coal in the world.

The auditors’ report on the sale of coal is the latest in a series of financial scandals to hit the Congress-led government, and the revelations have caused public anger.

India’s coal industry:

• With about 246 billion tons of coal reserves, India is one of the largest coal producers in the world

• 55% of India’s commercial energy needs are met by coal

• The biggest reserves are in the states of Orissa, Jharkhand and Chhattisgarh

• The government took over coal mining in 1973

• A new law to auction coalfields was introduced in 2010

• But auditors say the loss from misselling coalfields is $33 billion