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New Delhi: The CBI is investigating alleged corruption in MMTC's coal import from an Australian company at inflated prices, which the PSU's former CMD kept under wraps for more than 11 years, officials said on Tuesday.
The probe started only after the MMTC suffered a jolt in the Supreme Court, which had ordered an arbitration case in favour of the Australian company. The MMTC had to deposit Rs 1,088 crore in the Delhi High Court.
The MMTC ordered an internal vigilance enquiry into the allegations that certain officials of the PSU earned pecuniary benefits by allowing the Brisbane-based company to charge $300 per metric tonne (valued at about Rs 615 crore) when the global commodity prices had nosedived as a cascading effect of Lehman Brothers' collapse in 2008.
The glaring irregularities flagged in the vigilance report were enough for the MMTC top brass to recommend a CBI investigation. On a reference from the Commerce Ministry, the CBI registered a preliminary enquiry last year in which the role of two former senior officials is under scanner.
The agency did not give any comments on the developments.
In its complaint to the CBI, the MMTC alleged that it had entered into a long-term agreement for coal supply with Brisbane-based Anglo American Metallurgical Coal Pty Ltd on March 7, 2007. The agreement was for three delivery periods of one year each for the supply of free on board (FOB) basis where the buyer assumes all risk after the commodity is shipped.
The three one-year delivery periods spanned from July 1, 2004 to June 30, 2005, July 1, 2005 to June 30, 2006, and July 1, 2006 to June 30, 2007. These were extendable to two additional delivery periods.
According to the terms of the agreement, the MMTC could either agree to further extend or negotiate a fresh Long-Term Agreement with the company. The PSU availed itself of the first extended delivery period without any controversy, in which the coal price was kept at $96 per metric tonne.
The officials said the second extended delivery period was decided in alleged "connivance of MMTC officials and Anglo American Metallurgical Coal Pty Ltd" when the PSU officials agreed to a price of $300 per metric tonne while the previous year it was $96 per metric tonne.
Sources said the prices were to be negotiated through mutual discussion before the commencement of the relevant delivery period to extend the agreement for the delivery period. If the prices were not favourable to the MMTC, it could have entered into a fresh Long-Term Agreement, which would have enabled all coal suppliers to compete and thereby resulted in a competitive price.
A senior official of the MMTC had also recorded on the note sheet that up to March 2009, MMTC should try to avoid and defer the $300 per metric tonne (FOB) price of coal to be finalized for 2008-09. The caution was given as customers of Rashtriya Ispat Nigam Ltd (RINL)-MMTC had enough stock to meet their requirements up to March 2009.
One of the officials who was the CGM during the discussions had later risen to become the CMD and continued till 2020. The MMTC has alleged he "kept the matter under wraps" and avoided "detection and enquiry into the motives for this transaction".
The Lehman Brothers crisis hit the global economy on September 15, 2008, when the American global financial services firm went bankrupt. The officials said that as a cascading effect of the collapse of the American financial major, commodity prices, including coal, had nosedived.
According to the MMTC complaint, "despite adverse market conditions prevailing" and "without adequate assessment of the viability of high-priced raw material" for RINL's production, the dealing officials proposed and the Sale Purchase Committee of Directors (SPCOD) approved the proposal to purchase coal at $300 per metric tonne which valued at about Rs 615 crore (at the exchange rate of Rs 44 per USD).
It is alleged that the delivery order was granted without considering material changes in market conditions and that there was no pressing requirement for coal until March 2009.
It is also alleged that MMTC officials abused their position and colluded with Anglo American Metallurgical Coal Pty Ltd to gain a pecuniary advantage, the officials said.
The conspiracy resulted in wrongful gain to the Australian company and loss to the MMTC, the PSU said in its complaint.
The agreement was signed on November 20, 2008, after being approved by the SPCOD on October 6, 2008.