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HomeIndiaAnatomy of Gujarat’s ‘Rs 6,000-cr coal scam’: UPA-era MSME subsidy that beneficiaries...

Anatomy of Gujarat’s ‘Rs 6,000-cr coal scam’: UPA-era MSME subsidy that beneficiaries ‘never got’

A scheme guaranteeing subsidised coal for MSMEs was formulated in 2007-08 under the Manmohan Singh govt. Its implementation in Gujarat has spawned allegations of corruption.

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Ahmedabad: As an MSME, Ahmedabad-based Modern Rubber Industries was eligible for cheap coal — at much below the market rates — under a central government scheme meant to boost this segment of industry.

The company did approach an agency appointed by the Gujarat government to implement the scheme, but claimed to have received coal at the market price.

Anmol Traders, an MSME brick kiln, had a different experience. 

The Gandhinagar-based company said it purchased coal from a trader associated with another agency engaged for the scheme, in 2015, but was offered prices higher than the market rates.

Meanwhile, even though A&F Foods is listed as a beneficiary of the scheme (2017-18), it told ThePrint it had never dealt with any of the coal agencies tasked with implementing the scheme. 

In Gujarat, a shadow looms over the implementation of a Manmohan Singh-era scheme meant to provide coal to MSMEs across India at a cheaper rate.

All the three aforementioned companies are named on the website of Coal India as beneficiaries of the scheme, but claim to have derived no benefit from it.

This gives rise to questions: If some eligible companies were indeed given coal at market prices instead of subsidised rates, why are they listed as beneficiaries of the scheme? If the coal in question was sold at prices higher than market rates — as alleged, for example, by Anmol Traders — what became of the extra money paid?

There are allegations, including by the Congress, of the scheme spawning a Rs 6,000 crore “scam” in Gujarat over the last 14 years that saw more than 60 lakh tonnes of subsidised coal “diverted and sold to industries in other states at a higher price”.

The charges have been denied by officials in the Gujarat MSME department, which is in charge of coal allocation. But they have started an internal investigation nevertheless in light of a Dainik Bhaskar report last month. 

Speaking to ThePrint, Ranjeeth Kumar, Commissioner of the MSME department, called the accusations “a figment of imagination, imputing baseless, unfounded and defamatory allegations”.

Even so, interviews with the alleged beneficiaries of the scheme and an on-ground assessment suggest not everything adds up.

A visit to the purported premises of one of the implementing agencies — New Saurashtra Briquetting Industries Association — revealed a travel agency operating from the address instead.

The office of a second agency, Gujarat Coal Coke Traders & Consumers Association, appeared to lack full-time staff, bar an accountant, and didn’t have a formal name board.

Apart from the 3 companies named above, a fourth “beneficiary” could not be traced at the stated address. 

Some “representatives” of the implementing agencies told ThePrint they were buying subsidised coal “as cheap as Rs 3,500-4,000 per tonne” but refused to reveal the rate at which they were selling to the MSMEs.

The issue gains urgency because a coal crisis that saw prices surge over the past few months has hit the MSME sector particularly hard.

In October 2021, over 400 textile units in Surat, employing close to 5,00,000 people, had to cut down production because of the rising coal prices. In the same month, five paper mills in Vapi had to shut down temporarily, leading to hundreds of job losses.

Commissioner Kumar, however, dismissed all the allegations.

Sunil Kumar, head of corporate communications at Coal India, which allocates coal under the scheme, did not respond to ThePrint’s queries on messages, or calls.

Also read: Behind Bengal’s Rs 1,900-cr ‘coal scam’ story is Class 8 dropout who began as ‘petty coal thief’

A helping hand for MSMEs

The scheme guaranteeing subsidised coal for MSMEs was formulated in 2007-08. 

Under the policy, for small industries in Gujarat, coal is extracted every month from Coal India’s Western Coalfields and South Eastern Coalfields.

In order to ensure wide distribution of coal, states were asked to select agencies — state-nominated agencies or SNAs — and appoint a state official to monitor the process. 

The additional industry commissioner is the designated officer in charge of allocation and distribution of coal. But in Gujarat this post has been vacant since 2015, and the job has been given to the state MSME department.

Under the policy, the SNAs have been tasked with giving an estimate for annual coal demand to the state MSME department, which is to then notify Coal India. 

The amount of coal then allocated by Coal India, the public sector behemoth, is sent to the SNAs on a monthly basis. 

According to the Coal India website, 4 companies — New Saurashtra Briquetting Industries Association (believed to have shut shop seven years ago), Gujarat Coal Coke Traders & Consumers Association, Kathiawad Coal & Coke Consumers & Traders Association and South Gujarat Federation of Industries — have handled supply of coal in Gujarat under the scheme since 2007-08. 

The SNAs are given a contract by the state to buy subsidised coal from Coal India and sell it to MSMEs at prices below the prevailing market rates. 

Under Coal India guidelines, the SNAs can make a profit of 5 per cent and charge the end user for taxes and transport.

Data available on the Coal India website shows that MSMEs in Gujarat were allocated 2,16,000 tonnes of coal annually between 2015 and 2019. This allocation was increased in 2020 and 2021 to 15,00,000 tonnes.

State MSME Commissioner Kumar explained the higher allocation thus: “The Centre revised the definition of MSMEs in 2020, which… increased the umbrella of MSMEs in Gujarat. 

“Additionally, there has been a spurt in economic activity post-Covid. The coal quota for the state having remained stagnant since 2013-14, a need was felt to increase the allocation.”

Industry experts told ThePrint that while a textile processing unit uses about 30-50 tonnes of coal per day, a brick kiln can use up to 400-600 tonnes of coal annually in prosperous times. 

The ‘scam’

The Coal India website lists more than 300 Gujarat MSMEs as beneficiaries of subsidised coal in 2017-18, when the last data for the state was put out.

However, when ThePrint contacted some of the MSMEs listed, it got divergent accounts. 

Prajapati Vasu, owner of Modern Rubber Industries, said, “I purchased coal from New Saurashtra Briquetting Industries Association in 2016-17, but they sold it to me at the regular market price.”

Vasu claimed he didn’t know about the subsidy scheme and wasn’t informed about it by the SNA either.

Jignesh Prajapati, proprietor of Anmol Traders, spoke of dealing with one Shailesh Vaghela, who told ThePrint he worked with New Saurashtra Briquetting Industries Association a few years ago.

“I met a person called Shailesh Vaghela at another dealer’s office and he told me that his company too supplied coal,” said Prajapati. “I remember purchasing coal from him in 2015. Their prices were higher than regular market prices so I did not go back to them.”

Shanu Badami of A&F Foods, based in Ahmedabad, said he had never dealt with the SNAs. “How is the name of my company listed in the data? I have never dealt with them. Show me the proof and I will show you that my company has never dealt with them,” he added.

Faith Industries, another of the listed beneficiaries, said it “does not currently deal with any of the four SNAs”. An employee said: “First of all, we don’t have records of transactions from that long back on hand, and currently we are not dealing with any such companies.” 

Another company, Advance Bricks, could not be traced at the given address.

Jitendra P. Vakaharia, president of the South Gujarat Textile Processing Association, an industry lobby, said he had never heard of the four SNAs. 

“Among the 400 textile units here in Surat, I have never heard of any buying subsidised coal from these agencies. Had we known, we would have obviously flocked to them since coal is an essential commodity dearly priced,” he added.

“Even if small industry owners are buying from these SNAs in isolation, they have never mentioned it to the association members,” he said.

Also read: Vinod Rai wrong on coal scam, his stance hurt governance: Ex-coal secretary Anil Swarup

Address listed, but no office

On Ahmedabad’s bustling C.G. Road stands a rusty office complex.

Climb to the third floor and one finds the office of ‘Best Travel Ticket Service’. At its reception sits the owner, who says he is fed up of answering queries about New Saurashtra Briquetting Industries Association.

This is the address listed for New Saurashtra Briquetting Industries Association on the Coal India website, but the travel agency owner, who refused to be named, said they had had the office for 10 years now.

“I have had this office for the last 10 years but it has been nothing short of humiliating. Every few months, income tax officials turn up looking for the said coal distributor, alleging that it owes money to the department. It has destroyed our goodwill,” said the owner. 

Other office owners, who claimed to have been operating from the building for more than 20 years, said they had never heard of the coal distributor either.

A second SNA, Gujarat Coal Coke Traders & Consumers Association, has an office in the city’s Paldi area. When ThePrint visited early evening one day, there was no staff on the premises, bar an accountant named Joshi ji. A paper printout on the door announced the association’s name.

When this reporter asked to be connected to the owner, Joshi said “he is a busy man and doesn’t have time”. Even as he asked ThePrint to visit later in the evening, he raised his voice and asked this reporter to leave the premises. 

Harish Mehta of New Saurashtra Briquetting Industries Association said his company shut down seven years ago, adding that he now worked as a consultant for South Gujarat Federation of Industries.

Mehta organised a meeting with people said to be “representatives” of Kathiawad Coal & Coke Consumers & Traders Association and South Gujarat Federation of Industries — Hassan Narsi and Chunni Patel, respectively — but both of them refused to name the affiliates or owners of the companies.

Patel said the South Gujarat Federation of Industries was “first appointed SNA by the Gujarat government in 2012”.

Speaking about coal consumption, he said: “In our initial years of operation, we would barely get any coal, and procurement was as low as 10 lakh tonnes [a year]. But right now, since coal prices have increased due to a halt in imports [the month-long ban on coal exports by Indonesia earlier this year], we thought it would benefit MSMEs to get more coal from the central agency.”

Shailesh Vaghela, whose number is listed on the Coal India website, initially said he worked for New Saurashtra Briquetting Industries Association “but the company shut down 7 years ago”. “Now, I work with South Gujarat Federation of Industries,” he added. 

However, when asked to share the details of his company’s owners, he denied association with the coal industry itself.

When ThePrint checked the GST records of Kathiawad Coal & Coke Consumers & Traders Association and Gujarat Coal Coke Traders & Consumers Association, both were found to have filed their annual GST returns regularly but the amount that they paid could not be determined. 

Also, both companies had not filled in KYC details or authenticated their Aadhaar numbers.

ThePrint couldn’t find any numbers for Valsad-based Kathiawad Coal & Coke Consumers & Traders Association on the Coal India website. 

‘Baseless allegations’

At a press conference last month, the opposition Congress party alleged a scam in the scheme in Gujarat.

“In the last 14 years, 60 lakh tonnes of coal was sent from Coal India mines in the name of traders and small industries of Gujarat. Its average price is Rs 1,800 crore, at Rs 3,000 per tonne,” Congress spokesperson Gourav Vallabh told reporters in New Delhi. “Instead of selling it to traders and industries, it has been sold in other states at a price of Rs 8,000 to 10,000 per tonne.”

The party demanded a time-bound probe into the “scam” by a sitting judge of the Supreme Court, and said that all four chief ministers of Gujarat over the last 14 years should be investigated in the case. 

The state has been ruled by the BJP since 1995. Prime Minister Narendra Modi was the Gujarat chief minister from 2001 to 2014.

MSME Commissioner Kumar made light of the allegations. 

“Based on details obtained from Coal India, as against a total recommendation of 48.44 lakh metric tonnes coal since 2008-09 till date, the actual lifting of coal has only been 15.69 lakh metric tonnes,” he said in a written statement. 

“Therefore, the allegation with respect to pilferage of 60 lakh metric tonnes coal with alleged value of Rs 6,000 crore appears to be false.”

When asked about the apparent irregularities in coal trade by state SNAs, Kumar told ThePrint: “The MSME Commissionerate has not received any complaint in this regard so far.”

On the alleged lack of checks on SNAs, he said: “The appointment procedure for state-nominated agencies was last conducted in 2015 by the Government of Gujarat. Since then, there has been regular interaction between state-nominated agencies and MSME Commissionerate.” 

He stated that there “are regular correspondences with these agencies and government officials on record which clearly refute these baseless allegations”. 

“During said period, Coal India has also been allocating coal on a regular basis to these agencies. Hence, the allegation of these companies existing only on paper is baseless,” he added.

According to Kumar, “The subject of coal allocation since 2015 has been dealt with in the capacity of additional industries commissioner by various officials…”

Gujarat Industries Commissioner Rahul Gupta told ThePrint that the Joint Commissioner in the MSME department, S. Bhardwaj, was in charge of looking after coal allocation. ThePrint met Bhardwaj, but he refused to comment on the issue.

(Edited by Nida Fatima Siddiqui)

Also read: High coal prices to intensify India’s efforts to curb imports, lift domestic supplies


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