Coal scam: CBI files FIR against Hindalco’s Kumar Birla, ex coal-secy PC Parakh

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Economic Times

MUMBAI: The Central Bureau of Investigation on Tuesday named Kumar Mangalam Birla in a first information report (FIR) related to alleged irregularities in coal block allocations, sparking anger and disbelief across the business community over one of the country’s top industrialists being dragged into the controversy.

It also named PC Parakh, coal secretary from 2004 to 2005, and Hindalco, a company belonging to the Aditya Birla Group, of which Birla is the chairman, in the FIR. CBI has previously named prominent businessmen such as Naveen Jindal, chairman of Jindal Steel & Power, politicians and bureaucrats in the 14 FIRs filed so far in various coal block cases. The agency said searches were being conducted in Mumbai, Delhi, Bhubaneswar and Secunderabad in connection with the allocation of Talabira 2 and Talabira 3 coal blocks in Odisha to Hindalco. Shares of Hindalco fell briefly before recovering to end higher on the bourses.

Speaking exclusively to ET, Birla denied the allegations. “We have followed all processes in the coal mine allocation. Indeed, because of the delays in receiving permission for mining, our project (Aditya Aluminium) has also been delayed.”

Parakh, the coal secretary between March 2004 and December 31, 2005, expressed astonishment at being named in the FIR. “I am amazed at the inability of CBI to make a distinction between a bona fide decision taken in public interest and a conspiracy,” he said in a text message. “If allocation of Talabira to Hindalco was a conspiracy, then the prime minister, who approved the proposal, should have been named as accused No. 1 in the PE (preliminary enquiry).”

Business leaders across the country expressed shock at CBI’s actions. “It is ludicrous that an FIR has been filed against Kumar Mangalam,” said Deepak Parekh, chairman of HDFC, the country’s biggest mortgage lender. “He is straight as an arrow,” Parekh added.

Sources in the investigating agency alleged Parakh extended undue favour to Birla by overturning a decision of the screening committee that had not recommended allocation of the blocks to aluminum maker Hindalco. The FIR alleges criminal conspiracy by Birla and misuse of position by Parakh, a CBI official said. “The coal blocks were meant for allocation to public sector undertakings. However, the 25th screening committee in 2005 decided to allocate the blocks to Hindalco, after Birla met Parekh. Incriminating documents have been found in today’s search,” he said. “The agency is investigating the matter and more searches will be conducted. Birla could also be summoned for enquiry,” the CBI official added.

Responding to the allegation, Birla questioned the premise of CBI’s FIR. “How can I overturn the screening committee’s recommendations? It’s a ludicrous suggestion.”

In a statement late on Tuesday evening, Hindalco Managing Director Debu Bhattacharya said the mines were allocated in 2005 after several years of delays. The first application was filed in 1996 by Indal, the Indian subsidiary of Canadian giant Alcan. Hindalco bought out Indal in 2000. “To imply that our chairman, Kumar Mangalam Birla, managed to overturn the decision of the screening committee, is preposterous,” Bhattacharya said. He added that no mining has been done on the site as clearances have not been received though the project for which the mine was allocated will be commissioned later this month. “The mines in question — Talabira 2 and 3 — have been finally allotted jointly to Mahanadi Coalfields and Neyveli Lignite, both public sector undertakings. Hindalco only has a 15 per cent stake,” Bhattacharya said. “This will mean delayed returns from Aditya Aluminium, which has been set up on a capex of over Rs 11,000 crore. We hope this puts in perspective the struggle Hindalco has had to undergo for securing the coal and the irrecoverable economic loss that Hindalco has had to suffer. In the light of these facts, the allegations made are paradoxical,” Bhattacharya said.

CBI’s investigations into coal block allocations began last year after the Comptroller & Auditor General (CAG) faulted the government for allocating coal blocks between 2004 and 2009 in an inefficient manner resulting in a loss of Rs 1.86 lakh crore to the exchequer. The government, it said, had the option of following a bidding system for coal blocks, but chose not to. It set up a screening committee that allocated blocks based on expert appraisal.

Birla is not the first prominent businessman to be named in the matter. In June this year, CBI registered a case accusing Naveen Jindal, chairman of Jindal Steel & Power, and Dasari Narayan Rao, the minister of state for coal during 2004-08, of fraud and collusion in allocation of a coal block.

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