while writing on coal, it is essential to remember that corruption here is not limited to just the allocation of captive coal blocks. if anything, corruption is rife in this sector which seems to be creating india’s own personal resource curse. this story focuses on one of the other ways in which corruption in coal operates.
Although current rules prohibit private players from acquiring mines to extract and sell coal in the open market, they have been using an innovative arrangement with state mining corporations to do the same.
Under this arrangement, the coal ministry awards a mine to a state mining corporation (SMC). The SMC, in turn, floats a joint venture (JV), in which it holds a majority stake as sweat equity, but makes no investment. A private player holds a minority stake, but brings in the entire investment and handles all operations.
If the contract terms are lopsided or if output is not monitored, such an arrangement lends itself to abuse, as the Karnataka Lokayukta exposed while investigating illegal iron-ore mining in the state…