Orchestrated scam in merchant power projects, captive coal blocks and PSU bank loans?

There seemed to be an orchestrated move towards benefitting a few influential private companies backed by individuals to exploit land and coal resources with the help of the public moneys raised by PSU banks, alleged EAS Sarma, the former secretary with the GoI

 
EAS Sarma, former secretary with the Government of India has alleged that there seemed to be an orchestrated move towards benefitting a few influential private companies backed by individuals to exploit land and coal resources with the help of the public moneys raised by public sector banks.
 
Mr Sarma, in a letter written to Arvind Mayaram, secretary of finance and D Subbarao, governor, Reserve Bank of India (RBI) has said, “It is distressing to know that the bank defaults of ten companies amounted to Rs5.39 lakh crore (at 40% compounded annual growth rate, or CAGR) and now equates to 13% of the total bank loans and 98% of the net worth of the banking system. It is equally interesting to know that some of these companies have used the political clout they have to get captive coal blocks allotted to them purely on a subjective basis. Some of these companies are even known to have funded political parties in violation of Foreign Contribution (Regulation) Act (FCRA) on which I have formally lodged a complaint before Election Commission of India and home ministry.”
 
According a report by Credit Suisse, over the past five years, Indian banks have witnessed strong 20% annual loan growth. “However, this growth is increasingly being driven by a select few corporate groups and in fiscal 2012, over 20% of the incremental loans came from just ten groups. The total debt level of these ten (Adani, Essar, GMR, GVK, JSW, Jaypee Group, Lanco, Reliance ADA, Vedanta and Videocon) has jumped five times in the past five years to Rs5.39 lakh crore (40% compounded annual growth rate, or CAGR) and now equates to 13% of the total bank loans and 98% of the net worth of the banking system,” the report says. 
 
Credit Suisse said, “Investments of most of these groups are in similar sectors and projects (primarily, power and metals) and many of them may be stressed. The asset profile of many of these groups is similar, with infra, and to a large extent, power assets driving up investments in the past few years.” 
 
There is an impending financial crisis in PSU banks, which recklessly granted loans to developers of dubious merchant power projects and questionable captive coal blocks, cleared under suspicious circumstances by ministry of environment & forests (MOEF), ministry of coal and ministry of power, says Mr Sarma.
 
The Comptroller and Auditor General of India (CAG), in its recent report, has estimated undue benefits to the tune of Rs1.86 lakh crore to private players on account of coal blocks allocation to them without resorting to auction. The coal ministry is likely to contend before the Parliamentary panel that the estimates by the government auditor should not have been done in the manner it was made.
 
According to the former secretary, the government has been deliberately in a denial mode as several politicians of the ruling party at the Centre and those in the states were directly involved in this large scam. “Even after the CAG uncovered the magnitude of the scam, the same denial stance continues!” he said.
 
Mr Sarma said, “I was surprised at the latest response from the senior ministers of the United Progressive Alliance (UPA) that the government cannot de-allocate captive coal blocks cornered by a few private companies because the blocks are linked to several merchant power projects and because the banks have financed huge amounts to the developers of both the coal blocks and the merchant power projects. These ministers have, as expected, deftly turned the tables to convert what should be termed as one of the largest scams since Independence into a lame excuse to obfuscate the core issue and make it look as though the economy would collapse if the unethical, corrupt developers are to be penalised.”
 
On 27 August 2012, prime minister Manmohan Singh read a statement in Parliament rebutting the CAG report both in its reading of the law and the alleged cost of the government's policies. Bharatiya Janata Party (BJP), the main opposition party, has alleged that corruption was involved in the coal block allocation and the PM was responsible for it (coal block allocation). Following complaints from the BJP, the matter was referred to the Central Bureau of Investigation (CBI), which is now investigating some Members of Parliament (MPs) on criminal charges related to the issue.
 
“There are several influential persons who sponsored the developers of both the merchant power projects and the captive coal blocks and they were fully involved in getting environment and other clearances at a mind-boggling speed. They were the persons who pushed the PSU banks into throwing caution to the winds and lend huge amounts of public money to these unethical developers. In my view, those that try to blur the crucial issue of corruption and nepotism should not be allowed to get away,” Mr Sarma said in his letter.
 
Requesting, the Central Vigilance Commission (CVC) to oversee the investigations conducted by CBI, the former secretary says that it should also cover the improprieties in the Centre and the states clearing merchant power projects and in PSU banks granting loans indiscriminately. “(The) CVC should know that the scam is a much bigger one than that of captive coal blocks alone. He should know that the government will first try to stall de-allocation of the coal blocks and protect the unethical developers, as huge amounts seem to have already changed hands. If the government is forced to de-allocate the blocks finally, it will try to cover up the huge PSU bank scam by surreptitiously coming up with a scheme to ‘re-capitalise’ the NPA-stricken banks, a euphemism for covering up the associated bank scam,” Mr Sarma said.
 
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    COMMENTS

    Black Mamba

    7 years ago

    Question: Who is the loser in the end?
    Answer: The common man.

    Dahyabhai S Patel

    7 years ago

    It seems the person at the top wearing religious signs is not following the real religion; he is not following the oath he has taken as MP and the highest post he has "grabbed" some how; he is not serving Bharat Mata but some other Mata, younger to him, who I doubt has any ************* except the post held by default.

    Coal block allocation: Indian ‘elGordo’!

    Essar Power’s acquisition of Navabharat Power is one of the many facets of the Indian ‘elGordo’ where the windfall gain will run for decades, unlike its Spanish counterpart!

     
    Since 1812, the Spanish Public Administration has carried on a national lottery system, which eventually became popularly known as the Christmas Lottery, also called, as “elGordo”—the fat one! This is the biggest lottery world wide.
     
    The top prize money amounts to 540 million euros and 180 series of tickets sold at 200 euros apiece. As the cost is rather high, and in order to facilitate everyone to afford a purchase, the ticket is further divided into one-tenth or also known as the ‘decimos’.  The Spaniards look forward to getting a piece of the action by buying the tickets.
     
    Looks like the Indian version of the ‘elGordo’ is in getting a coal block allotment and actually commencing the mining operation after overcoming all the hurdles put up by the state and MOEF (ministry of environment and forests), and cap it by discovering millions of tonnes of high grade thermal coal!
     
    In reality, however, the 58 allottees that are under the CBI (Central Bureau of Investigation) scanner and also answering the various queries raised by the Inter Ministerial Group may have many different things to say in their defence. It will be a while before the final outcome of these investigations, FIRs, etc are made public!
     
    The enthusiastic press have gone deep into the bowels of the earth and have discovered much more muck than coal. For example, a report that has appeared in the Times of India gives an in-depth detail of the several transactions that have taken place.
     
    In the case of Navabharat Power, it was registered with a capital base of just Rs1 lakh, which signed an MOU (Memorandum of Undertaking) with the Orissa government to invest Rs9,675 crore in two—1,060 MW and 1,200 MW—power plants in Dhenkanal. It got a 4.7 million tonne (MT) of coal linkage in May 2006. Two years later, in January 2008, it got an additional 112 MT allotment from Orissa’s Rampia and Dipside coal block. Although 108 applications were received for this block, only two were invited (why?) to make a presentation and the final allotment went to Navabharat, although there were some real heavy-weights in the fray. Anyway, by 2011, the stakes were sold to Essar Power, for an enormous sum of money.
     
    This is one of the many facets of the Indian ‘elGordo’ where the windfall gain will run for decades, unlike its Spanish counterpart!
     
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    Indian courts can't judge arbitral proceedings held overseas: SC

    Overturning earlier verdicts by the apex court, a five-judge Constitution bench headed by Chief Justice SH Kapadia held that international commercial arbitration proceedings, conducted outside the country, cannot be heard and decided by the courts in India

     
    New Delhi: In a landmark verdict, the Supreme Court has held that arbitral proceedings conducted offshore would not be open to judicial scrutiny of Indian courts which can only deal with enforcement of foreign awards, reports PTI.
     
    The judgement, with prospective effect, is expected to come to the aid of companies which obtain arbitral awards in their favour abroad but face hurdles as these come under the judicial scrutiny in Indian courts.
     
    Overturning earlier verdicts by the apex court, a five-judge Constitution bench headed by Chief Justice SH Kapadia held that international commercial arbitration proceedings, conducted outside the country, cannot be heard and decided by the courts here.
     
    The verdict comes as big blow to petitioners including public sector unit (PSU) Bharat Aluminium Company Ltd, Tamil Nadu Electricity Board and Bharati Shipyard Ltd, who, in a batch of eight petitions, made a strong pitch for legal sanction to bringing arbitration proceedings abroad under the judicial scrutiny of Indian courts.
     
    The apex court outlined the scope and powers that can be exercised by a court here under the Arbitration and Conciliation Act to deal with arbitral proceedings held outside India.
     
    "We are of the considered opinion that Part I of the Arbitration Act, 1996 (which deals with the arbitration held in India) would have no application to International Commercial Arbitration held outside India.
     
    "Therefore, such awards would only be subject to the jurisdiction of the Indian courts when the same are sought to be enforced in India in accordance with the provisions contained in Part II (which deals with enforcement of foreign awards) of the Act," the bench, in its 190-page verdict, said.
     
    The Constitution bench had heard the issue at length after a three-judge bench had referred the batch of petitions to it.
     
    The court scrapped its earlier decisions which had held that the Part I of the Act would be applicable to "all arbitrations held out of India, unless the parties by agreement, express or implied, exclude all or any of its provisions." 
     
    "Here again, with utmost respect and humility, we are unable to agree with the aforesaid conclusions ..," the bench, also comprising Justices Surinder Singh Nijjar, DK Jain, Ranjana Prakash Desai and Jagdish Singh Khehar, said in the judgement.
     
    Justice Nijjar, writing the judgement, said, "...in order to do complete justice, we hereby order, that the law now declared by this Court shall apply prospectively, to all the arbitration agreements executed hereafter." 
     
    "We are of the considered opinion that the Arbitration Act, 1996 has accepted the territoriality principle which has been adopted in the United Nations Commission on International Trade Law (UNCITRAL) Model Law," the court said.
     
    It did not concur with the findings arrived at in earlier verdicts in Bhatia International and Venture Global Engineering cases that Part I of the Act, dealing with arbitral proceedings and awards in India, can be extended to such proceedings held outside unless parties, in agreement, bars the applicability of the Act on them.
     
    Drawing a distinction between two portions of the Act, it said the legislation makes it clear that there can be no overlapping or intermingling of the provisions.
     
    The bench also said that Indian courts should not entertain any plea seeking an "interim relief" against an arbitral proceedings being held outside.
     
    "In a foreign seated international commercial arbitration, no application for interim relief would be maintainable under Section 9 or any other provision, as applicability of Part I of the Arbitration Act is limited to all arbitrations which take place in India.
     
    "Similarly, no suit for interim injunction simplicitor would be maintainable in India, on the basis of an international commercial arbitration with a seat outside India. We conclude that Part I of the Arbitration Act, 1996 is applicable only to all the arbitrations which take place within the territory of India," it said.
     
    Out of the eight petitions, one was filed by Bharat Aluminum Company against Kaiser Aluminum Technical Services Inc against the judgement of Chattisgarh High Court which had refused to set aside an arbitral award delivered in London.
     
    Earlier, a SC bench, in 2008, differed on applicability of the Act on arbitral proceedings held outside the country and had referred it to a three-judge bench, which, in turn, sent it to the CJI for a decision by a the Constitution bench.
     
    The court said it agreed with the submissions that Parliament by limiting the applicability of Part I to arbitrations which take place in India has expressed a legislative declaration.
     
    "It has clearly given recognition to the territorial principle. Necessarily therefore, it has enacted that Part I of the Arbitration Act, 1996 applies to arbitrations having their place/seat in India," the five-judge bench concluded.
     
    "It is necessary to remember that we are dealing with the Act which seeks to consolidate and amend the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards.
     
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