As litigation amps up after the Supreme Court’s cancellation of all captive coal-block allocations, court documents are throwing light on one of the more puzzling aspects of the coal scam — the 74:26 MDO agreements… These JVs had several striking features. The MDOs held 74% in the JVs — which meant they controlled the mining operations. Two, the price charged by the MDOs was not on cost-plus basis — it was pegged to the prevailing Coal India price. This was odd because the public sector miner has underground and opencast mines, the former being more expensive to operate, and its price is an average of its cost of coal extraction from both kinds of mines. In contrast, the MDO blocks were all surface mines.
What is more, several such JVs were signed well before the blocks were even allotted. Take Karnataka Power Corporation Ltd (KPCL). It signed an MDO contract with Kolkata-based Eastern Minerals & Trading Agency (EMTA) on February 19, 2002. However, blocks were allotted to KPCL on November 10, 2003 — over a year and half later. This created a fresh puzzle. Given the competitive frenzy to get coal blocks, why were the state PSUs so sure they would land one that they signed mining contracts even before the blocks were alloted?