Corporate Jun 12, 2013
Shares in Jindal Steel and Power plunged to a four-year low in trade on Tuesday after the Central Bureau of Investigation filed an FIR against Congress MP and company chairman Naveen Jindal in the coal scam case.
CBI has alleged that Jindal's company Jindal Steel and Power Limited (JSPL) colluded with Minister of State for Coal Dasari Narayan Rao to influence screening committee that allotted coal blocks, by investing more than Rs 2 crore in return for being allotted a mine in Jharkhand.
The agency, which started investigations in June last year following allegations of irregularities in allocation of coal blocks to private companies between 2006 and 2009, also named "unknown" officials of the government's screening committee in the FIR. CBI will approach the Union government for sanction to question these officials.
According to a report in the Times of India, H C Gupta, the then coal secretary, is among those under investigation. CBI sources were also quoted as saying that Rao received a bribe of Rs 2.25 crore from Jindal's company in the form of investments into his firms within a year of getting the coal block.
The FIR also names three other companies - Gagan Sponge Iron Pvt Ltd, Jindal Reality, and New Delhi Exim Pvt Ltd - in which Jindal holds substantial shares, accusing them of influencing the screening committee during the allocation process. The probe revealed that JSPL and Gagan Sponge purportedly made false representations regarding their preparedness and eligibility in bagging the Amarkonda Murgadangal coal block in Jharkhand in 2008.
According to a report in the Economic Times, CBI is also probing Jindal's other companies that were allocated coal blocks between 2004 and 2008 when Dasari Rao was holding the coal portfolio.
"Rao's role is being probed in another case related to AMR Iron and Steel, in which son of Congress MP Vijay Darda is an accused," the report said.
Further, CBI sources told ET that they are preparing to send request for sanction under Section 6A to probe the 35th screening committee members in connection with their investigation as of the 250 coal allocations between 2004 and 2011, 154 have been made during Rao's tenure
"JSPL, as a law abiding company, is governed by a strong ethical code of conduct. This is an ongoing CBI investigation into coal block allocation. At this stage of investigation, JSPL is committed to fully cooperate with CBI," the company release said.
According to brokerage CLSA, the company's current operations would not be impacted as the allocation of those blocks were done much earlier. However, the company's valuation multiples could be under pressure.
Here are 10 things you ought to know about the coal scam:
1. Company chairman Naveen Jindal has been charged with criminal misconduct, conspiracy and cheating as the FIR alleges that his company Jindal Steel and Power misrepresented crucial information to land valuable coal fields from the government.
2. Former Minister of State for Coal Dasari Narayan Rao has also been named in the chargsheet for allegedly accepting kickbacks from Naveen Jindal in exchange for coal licences.
3. The Naveen Jindal group was the largest beneficiary of the coal block allotment since his company was allotted a total of 11 blocks
4. This is the twelfth FIR filed in the coal scam and the investigative agency is reportedly conducting searches at 19 places in Delhi, Hyderabad and Kolkata. The Congress MP's residence and head office in Delhi are also being raided in connection with the coal scam.
5. Two firms - Nalwa Sponge Iron Ltd and Gagan Sponge Iron Ltd - allegedly associated with Jindal - have been under the CBI scanner for some time and have reportedly also been booked. Nalwa Sponge and Gagan Sponge got one coal block each at Gare Palma IV, Chhattisgarh, in 2006, and at Amarkonda Murgadangal, Jharkhand, in 2008, respectively. The two coal blocks were being mined in joint venture with Jindal Steel and Power Ltd.
6. Jindal Steel and Power got a coal field in February 2009 (Talcher coal field in Angul in Orissa) with reserves of 1500 million metric tones well after the self-imposed cut-off date by the Centre on allocation of coal blocks. The Opposition alleged that the Government violated all norms to give him coal fields. Naveen Jindal, however, denied any wrongdoing. On 15 September 2012, an Inter Ministerial Group (IMG) headed by Zohra Chatterji (Additional Secretary in Coal Ministry) recommended cancellation of a block allotted to JSW (Jindal Steel Works), a Jindal Group company.
7. On 7 June, 2013 the Ministry of Coal issued showcause notice to Jindal Steel & Power for delay and unsatisfactory progress in development of Utkal B1 coal block in coal rich Chhendipada area in Angul district as no significant progress has been made by the company towards development of the coal block with critical milestones like land acquisition, grant of mining lease and application of mine opening permission still pending. The showcause notice to JSPL followed a caution letter issued earlier to the company on April 26, 2012, to expedite development of the coal block and to remain careful in the future with respect to milestones stipulated.
8. CBI, which started probing the allocation of coal mines following the Comptroller and Auditor General of India (CAG) report that pegged a notional loss of Rs1.86 lakh crore due to faulty allocation process, has already registered 10 cases. These FIRs accuse corporates of overstating their net worth, failing to disclose prior coal allocations, and hoarding rather than developing coal allocation.
9.The crackdown is part of the government's exercise to ensure that the allocated blocks do not remain unproductive for long. The Government has already de-allocated coal blocks in 22 cases and bank guarantees have been forfeited in case of another 36 entities.
10.The crux of the CAG's argument was that the UPA government had the authority to allocate coal blocks by competitive bidding, but chose not to due to which both public sector enterprises and private firms paid less than they might have otherwise.
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