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(ii) All the conditions imposed by the Central Government while conveying the previous approval to the State Government under Section 5(1) of the Mines and Minerals (Development & Regulation) Act, 1957 for grant of mining lease in favour of captive mining party should clearly form part of the lease deed to be executed between the concerned State Government and the party.

(v) No coal shall be sold, delivered, transferred or disposed of except for the stated captive mining purpose (power generation) except with the previous approval of the Central Government in writing.

(vi) There should be complete synchronization between the captive coal mining operations and the development of end-use (power generation) plant so that no situation arises where the company is left with coal extracted from the captive block when the end-use plant is yet to be operational.

“We observed that ➢ Depending on the type of coal being washed and the requirement of the captive user, the rejects and middlings are generated from washery. A study report indicates that washing of D-grade coal generates rejects and middling of F and G-grade, and such low quality coal was also being used in power generation.

➢ The purpose of allocation of coal blocks for captive use under section 3(3) of the Coal Mines (Nationalisation) Act, 1973 is not to enable free trading of coal by private companies. The basic concept of captive mining permitted under the aforesaid Act is that the coal obtained from a captive block shall be used entirely and exclusively for the specified and approved end use by the allocatee Company and, therefore, the production of surplus coal should not result in any undue advantage to the captive block allocatee as the coal block is allotted to them for use in their end-use plant only and any additional production from the block should be made available to the Government for utilization. ➢ While allocating the coal block in November 2003, the Government directed the Company to use the rejects for its own captive consumption. ➢ In reply to the clarification sought (October 2003) by the Ministry of Coal regarding detailed plan about the use of middling, tailings and rejects etc, the Company informed (October 2003) that the same was proposed to be used for power generation with fluidized-bed boilers. Thus, the inaction on the part of the Company resulted in the KECML/EMTA disposing the coal rejects without transferring the revenue to KPCL. Considering the coal rejects as G-grade based on GCV undue benefit afforded to the KECML/EMTA worked out to Rs. 52.37 crore, as detailed below:

between the parties to the MOU.

KECML entered into MOU with GCWL to dispose of the rejects without the concurrence of the Company. Despite the fact that the Company holds the right on the captive coal blocks, no provision was made in the FSA made by the Company with KECML for supply of rejects/middling. It did not demand the washery rejects from KECML either for its captive consumption or for its disposal by its own Year Coal Minimum Average Loss (Rs.) means with the approval of Central produced quantity CIL rate Government. at Baranj of of G OCP (in rejects grade Tonnes) as per coal The conditions of allocation inter-alia included MOU (Rs.) that if the coal was being washed, tailings, (10%) middling or rejects, as the case may be, from 2008-09 990839.026 99083.903 590 58459502.53 washery should be used for captive 2009-10 2252358.28 225235.83 620 139646213.05 consumption only by the Company as approved 2010-11 2274994.46 227499.45 650 147874639.58 2011-12 2188869 218886.9 650 142276485.00 by the Central Government. Further, no coal 2012-13 570869.3 57086.93 620 35393896.60 shall be sold, delivered, transferred or disposed (up to of except for the stated captive mining purpose May (power generation) and with the previous 2012) approval of the Central Government in writing. 52,36,50,736.76 We observed that: b) It may be noted that the said rejects are only > Depending on the type of coal being Stones / Boulders not consistent with the size of washed and the requirement of the captive coal :( - 25 mm) for which the boiler is designed, Criminal Appeal No. 1659-1660 of 2024 user, the rejects and middling are generated hardly have any calorific value. Therefore the said from washery. A study report indicates that rejects have been used for leveling, piling etc. washing of D-grade coal generates rejects towards facilitating Integrated Baranj OCP. and middling of F and G-grade, and such low quality coal was also being used in c) The Audit comment is a generalized observation power generation. without any factual support and as such cannot be concluded that the washery rejects irrespective of the > The purpose of allocation of coal blocks for geological location of the source of coal would have captive use under section 3(3) of the Coal Useful Heat Value (UHV) to cater to the generation Mines' (Nationalization) Act, 1973 is not to requirement. In fact, the rejects generated in the present enable free trading of coal by private case are only shale and non- coal matter. Hence the companies. The basic concept of captive conclusion drawn by Audit that the rejects are G- grade mining permitted under the aforesaid Act is that is not only arbitrary but also not based on the ground the coal obtained from a captive block shall be geological realties. used entirely and exclusively for the specified and approved end use by the allocatee Company and, therefore, the production, of surplus coal should not result in any undue advantage to the captive block allocatee as the Thus, the abandonment of rejects at the collieries coal block is allotted to them for use in their end- end has been resorted to based on its utility, as use plant only and any additional production otherwise its transportation would have imposed from the block should be made available to the additional burden on the Company. Government for utilization.