Companies & Sectors
Coal mining: What next after SC decision to cancel blocks

The new unit cost per tonne of mined coal is going to be higher than the previous method, but would still be a lot cheaper than imported coal or obtaining supplies from Coal India. Also in the e-auction, govt need to consider giving a right of first refusal to present block owners


If there is reward and a record to be registered for the longest whistle blower in the world, perhaps it should only go to one deserving person, a member of Parliament (MP) from Bharatiya Janata Party (BJP), Hansraj Ahir, who represents Chandrapur constituency in Maharashtra. According to the press reports available, he appears to have stated: "Since 2006, I regularly followed the matter with the Centre and argued the coal blocks allocation were illegal. It was nothing but the loot of the country's natural resources. In my communications to former Prime Minister Manmohan Singh, Coal Minister, I made a strong case for the allocation of coal blocks through auction. However, the UPA government never responded positively".


MP Ahir is reported to have said: “that the Supreme Court's verdict has vindicated his stand that the allotments were illegal and done in an arbitrary fashion."


It may be recalled that the Supreme Court's bench consisted of Chief Justice RM Lodha, Justices Madan B Lokur and Kurien Joseph. The Bench cancelled 214 coal block allocations and permitted only four, one each to NTPC, SAIL and two to Reliance Power, all covering ultra mega power projects (UMPPs). The rest stood cancelled but were given time to complete the process of handover on or before 31 March 2015, to state-run Coal India Ltd (CIL).


Additionally, all these coal block allottees were to pay a penalty of Rs295 per tonne of coal mined and, fortunately, the verdict did not prevent them from participating in the auction process that the government may employ to dispose off these blocks after 1 April 2015. In the interim period, the "owners" of the blocks were permitted to continue their mining operation, subject to the penalty of Rs295 per tonne imposed. These mines account for about 10% of the annual production of CIL, of roughly 50-53 million tonnes.


Apart from private companies, such as Bhushan Steel, Electrosteel, Rungta Mines, Hindalco, Adani Power, CESE, Jan Infrastructure, Monnet Ispat, Jindal Steel & Power, Gagan Sponge and Strategic Energy, there were many others from various public sector organisations. Some of the public sector units (PSUs) had made arrangements with private mining companies to operate blocks allocated to them.


Even though the previous government had made allocation of these coal blocks, due to the inadequate supplies from Coal India, India's sole and largest supplier, imports had to continue, and the last fiscal saw imports of over 168 million tonnes of coal valued at Rs95,000 crore! And yet, we have had power outages and perennial shortages of electricity supplies in states, where thermal based power was generated.


The three-judge bench, headed by Chief Justice RM Lodha has ordered that Coal India take over the projects once these are cancelled and manage them till the reallocations are made. He is said to have stated that "breathing time is required to the allottees to manage their affairs on the cancellation of the coal blocks".


The apex court has also negated the apprehension regarding the capacity of Coal India, "that CIL is inefficient and incapable of accepting the challenge, as submitted by the learned counsel, is not an issue at all. The Central government is confident as submitted by the learned Attorney General that CIL can fill the void and take things forward" said the Supreme Court in its judgement on the cancellation of the blocks.


The companies concerned, who have lost the coal blocks, will also have to pay the penalties "within a period of three months and in any case on or before 31 December 2014”. The only silver lining is that, if and when these blocks are auctioned, the Supreme Court has been kind in not preventing these block holders from participating to secure them back!


There are some relevant facts that one needs to note: that the average cost of extracted coal from the captive mines varies from Rs600 to Rs800, whereas the e-auctioned coal supplied by 'Coal India costs Rs2,200 per tonne as against the imported variety at Rs4,000. Therefore, the economies of scale make a captive mine most viable under the circumstances.


In the changing circumstances, what are the steps that need to be taken urgently? Can the Government speedily organize an auction, bearing in mind that it took almost nine months to arrange for auctioning 122 licences after the Supreme Court cancelled the 2G telecom licences in February 2012? Should the government fix a base price for the auction or opt for a revenue sharing mechanism? Can they organise a suitably worded tender document so as to avoid any complications in the future?


A team of legal experts can easily work on the basis of the 2G document to prepare a tender, with suitable modification. This can be made public in 60-90 days time, followed by 30 days for actual tendering, 30 days for study and finalisation. In fact, if these are planned and done on a priority scale, auctions can be completed in such a manner so as to handover the mines in April 2015 itself! This could be also achieved easily, if the tender is only open to the current holders, who have "lost" the block, by virtue of the Supreme Court's verdict, and all others who are directly in need of linked fuel supplies.


If such a dynamic move is made, what can the Government expect? The "current" block owners can come to an "understanding", in the cartel fashion, when it comes to bidding, so that each of them, who have supposedly "invested" huge sums in each of the blocks, can do their best to salvage their "assets" and "investments", so as "retain" the block. We must remember that most of them may have "incurred" heavy investments in building permanent infrastructure facilities, obtained mining machinery and other essential equipment in the mines that they currently "own" and fair chance needs to be given to them to "recover" such costs.


Conditions such as the "successful" bidder must carry on the mining operations, and not sub-let to others; consume the mined coal themselves and excess produced if any, should be made available to a central pool controlled by CIL, and undertake NOT to import any coal would probably make the whole exercise workable and sustainable.


Government would do well to accept a flat rate on the coal mined, besides the usual terms of royalty. Efforts should also be made to ensure that the wage earners, who will actually be involved in mining operations, are paid fair wages and social obligations are met by the owners.


When tenders are opened, a right of first refusal should be given to the present block owners as this is one way of getting the confidence and salvaging the situation. The government must remember that, because of the changing circumstances, the new unit cost per tonne of mined coal is going to be higher than the previous method, but still a lot cheaper than imported coal or even obtaining supplies from Coal India. The new allottees, once the auction is complete, may also be encouraged to invest in the Railways for ensuring movement of cargo from their own pitheads to site, and if any of them should turn out to be power generators, they should be encouraged to set up power plants at the site.


(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)


Delhi HC upholds Rs25,000 penalty against Railway Board CPIO

The HC dismissed the CPIO's petition at the admission stage itself against CIC's decision to impose a penalty of Rs25,000. This ruling is important because several times, public authorities have been found approaching courts at the drop of hat and at the cost of the tax payer


In a landmark decision, the Delhi High Court dismissed the appeal filed by Central Public Information Officer (CPIO) of the Railway Board against the decision of Central Information Commission (CIC) to impose maximum penalty of Rs25,000. The verdict is laudable, because the Court dismissed the petition at the admission stage itself.

An official handling Right to Information (RTI) application cannot 'escape' his responsibility of answering queries by simply forwarding the application to other officials, the High Court ruled while upholding the penalty imposed by the CIC.

I had filed an appeal under the Right to Information (RTI) Act, before the CIC after the CPIO of Railway Board repeatedly denied providing information. The Commission held multiple hearings and in an exhaustive, reasoned order, directed the CPIO to provide information as well as imposed penalty on him on 11 March, 2013. The CPIO, knowing very well that there is no provision in RTI Act, 2005 to review order, approached the CIC to review its own order. The review was denied by CIC vide its letter dated 11 April 2014.
The CPIO of Railway Board then approached Delhi High Court, which upheld the decision of CIC on 12 September 2014. Few important legal points are settled by this decision of Delhi High Court:

(a)  CIC does not have powers to review its own decisions.

(b) Section 6(3) of the RTI Act cannot be read to mean that the responsibility of a CPIO is only limited to forwarding the applications to different departments or offices.


Forwarding an application by a public authority to another public authority is not the same as a Public Information Officer (PIO) of a public authority arranging or sourcing information from within its own organisation. The PIO cannot escape his responsibility to provide information by simply stating that the queries were forwarded to other officials.

(c) It is not necessary that the penalty be imposed by the CIC only while considering an appeal; penalty can also be imposed by the CIC if on inquiry made pursuant to a complaint, it is found that a CPIO has not furnished the information within stipulated time or has knowingly given incorrect or incomplete information.

According to the section 6(3) of RTI Act, if a CPIO receives an application, the subject matter of which is more closely related to another public authority, he must transfer the application or the portion of it to the concerned authority within five days of receiving the application.

However, when the matter is concerning their own public authority, CPIOs can seek help of fellow officers under section 5(4) of the RTI Act. The law mandates the officer, whose assistance has been sought by the CPIO, to render all the assistance.

It is unfortunate that public authorities are openly flouting the decisions of Central Information Commission and State Information or approaching the courts at drop of hat at the cost of tax payer. It has been revealed through RTI that some public authorities have up to Rs5 lakh per hearing to some counsels in RTI matters.

(Mumbai-based Girish Mittal is an RTI activist)



Praveen Sakhuja

2 years ago

Judgement is worth appreciation. This will lead to CPIO's to stick to their role. by transferring application under section 6(3) within the same Public Authority jurisdiction to misplace the information sought. Export Inspection Council has adopted this method by setting a RTI Cell headed by CPIO, he transfers the applications to various appointed ACPIO's within the organization, who simply say - I am not custodian of information and application is dumped with supporting orders of FAA. motive of getting information is dumped in deep sea as applicant is to wait for another 12 months for call from CIC after preliminary wait of two months. may this decision force to review transfer under section 6(3) within the jurisdiction of same Public Authority.


2 years ago

More power to you sir.

For Oil & Gas Companies, Rigging Seems to Involve Wages, Too

US Department of Labor investigations have uncovered hundreds of cases in which oil and gas workers, many involved in dangerous jobs, are being cheated of earnings


A ProPublica review of U.S. Department of Labor investigations shows that oil and gas workers – men and women often performing high-risk jobs – are routinely being underpaid, and the companies hiring them often are using accounting techniques to deny workers benefits such as medical leave or unemployment insurance.

The DOL investigations have centered on what is known as worker "misclassification," an accounting gambit whereby companies treat full time employees as independent contractors paid hourly wages, and then fail to make good on their obligations. The technique, investigators and experts say, has become ever more common as small companies seek to gain contracts in an intensely competitive market by holding labor costs down.

In the complex, rapidly expanding oil and gas industry, much of the day to day work done on oil rigs and gas wells is sub-contracted out to smaller companies. For instance, on one gas rig alone, the operator might hire one company to construct the well pad, another to drill the well, a third company to provide hydraulic fracking services and yet another to truck water and chemicals for disposal.

But for the thousands of workers in the hundreds of different companies, a single standard is supposed to apply: by law, they must be paid more than minimum wage and they must be fairly compensated for any overtime accrued.

In 2012, the DOL began a special enforcement initiative in its Northeast and Southwest regional offices targeting the fracking industry and its supporting industries. As of August this year, the agency has conducted 435 investigations resulting in over $13 million in back wages found due for more than 9,100 workers. ProPublica obtained data for 350 of those cases from the agency. In over a fifth of the investigations, companies in violation paid more than $10,000 in back wages.

One of those companies was Morco Geological Services, a company providing mud logging services for other oil and gas drilling companies. In 2013, the DOL found that Morco was paying some workers $75 daily for working virtually round-the-clock shifts. The company eventually agreed to pay $595,737 in back wages to 121 workers following the DOL's investigation. In another significant case, Hutco, a company providing labor services to the oil and gas industry, ended up paying $1.9 million to 2,267 employees assigned to work in Louisiana, Mississippi and Texas.

"The problem of misclassification has become pervasive," said Dr. David Weil, a former economics professor at Boston University who today heads the DOL's Wage and Hour Division. "Employers are looking for opportunities in a changing business landscape at the employee's expenses to cut corners as much as possible, leaving room for wage and hour violations."

Over the last decade, the oil and gas industry has seen tremendous growth. Between 2007 and 2012, when average employment in all U.S. industries fell by 2.7 percent, employment in the oil and gas industry increased by over 30 percent. According to research conducted by Annette Bernhardt, a scholar on low-wage work, 84 percent of workers in the oil, gas and mining industry were employed by contractors in 2012.

At the same time, the industry has also seen an increase in fatalities and injuries on the job. There is, so far, no evidence to suggest that these accidents are a result of inadequate training or overworked laborers. But accounts from other industries that heavily outsource work suggest those risks could be present.

For example, a 2012 investigation by ProPublica and PBS Frontline showed that cell phone carriers often contract out the dangerous job of climbing towers to smaller firms, which don't provide the necessary training and equipment to climbers. As a result, the death rate was 10 times higher among cell tower climbers than other construction workers.

Between December 2009 and November 2011, Troy Bearden worked on gas rigs in Pennsylvania and Colorado for Precision Air Drilling Services, a company that provides labor services for oil and gas exploration around the country. During that time period, Bearden worked an average of 12 hours a day, seven days a week, unloading and hooking up drilling equipment and maintaining it during operation.

Bearden was a full time employee of Precision Air Drilling, but the company classified him as exempt from the federal overtime statute, the Fair Labor Standards Act, and did not pay him time and a half for his overtime hours.

In 2011, Bearden and other workers filed a class action lawsuit against the company. Precision Air Drilling settled for $500,000.

"We know that the oil and gas industry has a reputation of paying high wages, but the economic reality often is they receive large paychecks because of the number of hours they're putting in," said Betty Campbell, the Deputy Regional Administrator for the Wage and Hour Division’s Southwest Region.

Labor lawyers specializing in wage disputes say the governing law – the Fair Labor Standards Act – is not easy to understand, interpret and comply with. As a result, they say employers can be unintentionally violating wage laws. But several investigations by the DOL show there are companies willfully dodging their responsibilities. The violations – accidental or intentional – are being committed by companies large and small, lawyers and labor officials say.

"You would think that some of the larger companies would be better in terms of compliance, what we're seeing is these violations are really rampant in this industry and affect all sizes of companies," said Shanon Carson, a lawyer with Philadelphia-based Berger & Montague, who has represented several oil and gas workers, including Bearden, in class action lawsuits.

The oil and gas industry is hardly the only industry to be afflicted with wage abuses. A recent investigation by McClatchy found that misclassification of workers was especially rampant in the construction industry, where companies flouted labor laws to evade taxes.

In the last few years the DOL has been cracking down on companies in several industries including construction, healthcare and hospitality. In recent years the Wage and Hour Division has had its funding increased by millions of dollars and upped its number of investigators by 300.

Federal wage and hour lawsuits have also seen an increase. Last year alone the number of Fair Labor Standards Act cases increased by 10 percent to 7,764.

"Anecdotally, I think the trend is similar if not more in the oil and gas industry simply because since the downturn in 2008 they've continued to grow and continued to expand and hire," said Steve Shardonofsky, a lawyer with Seyfarth and Shaw, a Chicago law firm that typically represents the industry.

Yet, worker rights groups and some lawyers believe there are likely thousands of mistreated workers unaware of protections under wage laws, partly because oil and gas activity primarily takes place in rural areas.

"Oil field workers are traditionally non-union. They're isolated in man camps and on their sites and it's hard [for union organizers] to get to them," said Alex Lotorto, union delegate for Industrial Workers of the World.

If you're an oil and gas worker and your employer pays you a day rate, classifies you as an "independent contractor" or violates wage laws in other ways, help our reporting by writing in with your story to [email protected].




We are listening!

Solve the equation and enter in the Captcha field.

To continue

Sign Up or Sign In


To continue

Sign Up or Sign In



The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)