Coal corruption scandal in India involves key figure in India-KY coal deal

A major public corruption scandal involving coal-connected politicians and industrialists is rocking India's business and political circles. At the center of the $34 billion scandal is a man named Mr. Manoj Jayaswal, the chairman and managing director of a company known as the Abhijeet Group. If that company's name sounds familiar, it should. Just one month ago, Kentucky Governor Steve Beshear announced a $7 billion private-sector deal reached between the Abhijeet Group and coal producers in Kentucky and West Virginia.

The scandal appears to revolve around the ways in which government owned coal tracts in India have been awarded to private interests. Starting in 2004, many tracts of state-owned coal, called "blocks," were awarded by the Indian government to private individuals and companies in an effort to increase domestic coal production. The government did not use a competitive bidding process to award the blocks, and it appears that some of the assets were given for free to individuals who immediately sold them for huge sums. In August India's auditor and comptroller issued a report documenting that many blocks were given to individuals and companies with close ties to powerful politicians.

According to an Indian newspaper, the Indian Central Bureau of Investigation (CBI) recently raided locations in 30 cities as part of its investigation into the scandal that has come to be known as "Coalgate." The CBI also filed complaints against three companies connected to Mr. Manoj Jayaswall for "irregularies in coal-block allotment." 

News of the scandal was first reported in Kentucky on September 6, 2012 by Erica Peterson of WFPL-FM radio. Her report cited the Indian newspaper above, and noted:

"There are doubts...whether the embattled Abhijeet Group will be able to honour its commitment on Kentucky coal import, considering that it was allotted 10 coal linkages and now stands accused of misrepresenting facts and making false claims in applying for blocks in India and later selling stake in an irregular manner."

A scathing story in yesterday's New York Times provided an additional view of the scandal. According to that article:

"Mr. Jayaswal is embroiled in a $34 billion coal mining scandal that has exposed the ugly underside of Indian politics and economic life: a brazen style of crony capitalism that has enabled politicians and their friends to reap huge profits by gaining control of vast swaths of the country’s natural resources, often for nothing."

In yet another wrinkle to this story, Erica Peterson also reported that the deal with the Abhijeet Group to purchase Central Appalachian coal was brokered by Keith Hall, a state Representative from Pike County, Kentucky. According to Hall's financial disclosure form, he owns several mines and coal-related businesses and sits on the board of FJS Energy, the New Jersey-based company that signed the deal with India. Rep. Hall himself has been the focus of earlier ethics investigations, and last October was fined $2,000 by the Kentucky Legislative Ethics Commission.

When questioned about his role in the deal, Rep. Hall proudly told Peterson, “I’m not just a friend of coal. I’m coal’s best friend.”

As it happens, Governor Beshear is currently participating in a 7-day economic development visit to India. We'll be watching to see if reporters ask him about this scandal - and it's possible impact on Kentucky - when he returns.

UPDATE, September 18, 2012: The Lexington Herald Leader has picked up this story with an editorial titled, "Tainted coal deal; partner in India suspected of corruption."

UPDATE, September 18, 2012: Erica Peterson has a follow-up story on WFPL which gives more details from Indian media sources. She includes a quote from Governor Beshear who is traveling in India this week.