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Now,CAG sees Rs 10 lakh cr coal ‘scam’

This was pointed out in a CAG report on allocation of coal acreages,sans auction,to 100 cos.

Written by Agencies | New Delhi | Published: March 22, 2012 2:12 pm

In another huge embarrassment to the government after the 2G fiasco,the Comptroller and Auditor General (CAG) has estimated a Rs 10.6 lakh crore loss to the exchequer on account of allotment of coal blocks during 2004 to 2009 without auction to 100 private and public sector companies.

In a draft report on allotment of coal blocks that has created a political storm,the official auditor has estimated a “windfall gain” of Rs 6.31 lakh crore (PSUs – Rs 3.37 lakh crore and private parties – Rs 2.94 lakh crore) based on the prices prevailing during the year of allocation on constant cost and price basis and as on March 31,2011.

The amount at current prices would now work out to Rs 10.67 lakh crore (PSUs – Rs 5.88 lakh crore and private parties – Rs 4.79 lakh crore),the CAG said in the draft report.

In its reply,the Coal Ministry said in June 2004 that there was a substantial difference between the price of coal supplied by Coal India Ltd (CIL) and the cost of coal produced through coal blocks allocated for captive mining and as such there was windfall gains to the allotees,part of which the government wanted to tap through competitive bidding.

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“The windfall gains to the allotees were expected to be substantial,” it had stated.

The CAG report comes more than a year after its report on the allocation of scarce 2G telecom spectrum on first-come-first-service basis in which it had estimated a presumptive loss of Rs 1.76 lakh crore to the exchequer.

The CAG in its draft report stated that Planning Commission as well as Department of Expenditure had supported the concept of bidding of coal blocks for captive mining.

Ministries of mines and coal too had supported such a move but Power Ministry and state governments of Chattisgarh,Rajasthan and West Bengal had expressed reservation.

“There was an element of subjectivity,opaqueness and lack of transparency which allowed windfall gains to the allocattees,” CAG said.

The Coal Ministry,in its comments to CAG,stated that assumption of windfall gains was based on “incomplete appreciation of the circumstances prevailing then and sequence of events thereafter.”

The Ministry added that coal production from captive blocks was not available for commercial sale and out of 137 blocks,62 coal blocks were allocated to the government companies.

“While appreciating the constraints and the view point of the Ministry,the fact remains that coal being a natural resource ought to have been allocated to private players on competitive bidding as it brings in more transparency and objectivity in the system,” CAG added.

CAG draft report cited the Supreme Court judgement on 2G spectrum that held auction as the best way of allocating scarce natural resources.

Report on coal block loss “exceedingly misleading”: CAG

An initial audit report estimating Rs 10.67 lakh crore loss to the exchequer on account of allotment of coal blocks during 2004 to 2009 without auction caused an uproar in the Parliament today and was described as “exceedingly misleading” by the CAG himself.

As media carried reports of the draft CAG report,the Comptroller and Auditor General wrote a letter to the Prime Minister Manmohan Singh this afternoon,excerpts of which were released by the PMO.

“In the extant case the details being brought out were observations which are under discussion at a very preliminary stage and do not even constitute our pre-final draft and hence are exceedingly misleading,” the CAG said in the letter.

The official auditor said that “pursuant to clarification provided by the Ministry (of Coal) in exit conferences held on February 9,2012 and March 3,2012,we have changed our thinking”.

“In fact it is not even our case that the unintended benefit to the allocatte is an equivalent loss to the exchequer. The leak of the initial draft causes great embarrassment as the audit report is still under preparation.

Such leakage causes very deep anguish,” the CAG letter was quoted as saying by the PMO release.

In the leaked report on allotment of coal blocks,CAG had estimated a “windfall gain” of Rs 6.31 lakh crore (PSUs – Rs 3.37 lakh crore and private parties – Rs 2.94 lakh crore) based on the prices prevailing during the year of allocation on constant cost and price basis and as on March 31,2011.

The amount at current prices would now work out to Rs 10.67 lakh crore (PSUs – Rs 5.88 lakh crore and private parties – Rs 4.79 lakh crore),the CAG said in the draft report.

In its reply,the Coal Ministry said in June 2004 that there was a substantial difference between the price of coal supplied by Coal India Ltd (CIL) and the cost of coal produced through coal blocks allocated for captive mining and as such there was windfall gains to the allocattees,part of which the government wanted to tap through competitive bidding.

“The windfall gains to the allocattees were expected to be substantial,” it had stated.

The CAG report comes more than a year after its report on the allocation of scarce 2G telecom spectrum on first-come-first-service basis in which it had estimated a presumptive loss of Rs 1.76 lakh crore to the exchequer.

“There was an element of subjectivity,opaqueness and lack of transparency which allowed windfall gains to the allocattees,” CAG said.

We have not reaped windfall profit,says NTPC chief

State-run NTPC today said it has not reaped any windfall profit from the coal mines allocated during 2004-09,amid uproar in Parliament over a CAG report pegging Rs 10.67 lakh loss to the exchequer on account of coal allocation during that period.

“There is no way by which NTPC can make windfall profit out of the coal produced from these mines as under the CERC regulated regime the cost of coal from these mines will be pass-through in the power tariff…,” NTPC Chairman and Managing Director Arup Roy Choudhury said.

“Therefore,it will only help to reduce the ultimate cost of power at the end-user,” he noted.

Fuel accounts for about 80 per cent of tariff of power produced from a coal-fired plant.

As media carried reports of the draft CAG report,the Comptroller and Auditor General wrote a letter to the Prime Minister Manmohan Singh this afternoon,excerpts of which were released by the PMO.

“In the extant case the details being brought out were observations which are under discussion at a very preliminary stage and do not even constitute our pre-final draft and hence are exceedingly misleading,” the CAG said in the letter.

Choudhury also said,”We have not seen the details of the CAG report,therefore,we are not able to give any firm comment on this matter”.

According to him,the mines were allocated to meet some portion of its coal requirement since Coal India is not able to meet the company’s growth rate.

“These mines,which were allocated to NTPC,had to be developed i.e. surveys,soil investigation,environmental clearance,mining plan approval,etc. were to be done by NTPC before any activity could start.

CAG report on coal allocation is only a draft report: Pranab

Amid uproar in Parliament over the reports of alleged coal scam of Rs 10.7 lakh crore,Finance Minister Pranab Mukherjee today said CAG’s report is only a draft.

“It (Comptroller and Auditor General’s report on coal allocation) is not yet CAG report. It is a draft report”,he told reporters here.

Mukherjee further said,”normal practise is they (come out with) draft report… then Ministry’s comment come. After the comments… there is a regular system through which it will be placed on the table of (both Houses) Parliament.”

CAG’s draft report has estimated a Rs 10.6 lakh crore loss to the exchequer on account of allotment of coal blocks without auction,during 2004 to 2009,to 100 private and public sector companies.

The draft created a political storm leading to disruption of proceedings of the Lok Sabha and the Rajya Sabha.

The official auditor has estimated a “windfall gain” of Rs 6.31 lakh crore (PSUs – Rs 3.37 lakh crore and private parties – Rs 2.94 lakh crore) based on the prices prevailing during the year of allocation on constant cost and price basis as on March 31,2011.

The CAG report comes more than a year after its report on the allocation of scarce 2G telecom spectrum on first-come-first-service basis. It had estimated a presumptive loss of Rs 1.76 lakh crore to the exchequer.

Coal blocks allotted in transparent manner: Jaiswal

Amid media reports that undue benefits of Rs 10.67 lakh crore were extended to private and public sector companies in allocation of coal blocks,the government today said it followed a transparent process in giving mining rights to the firms.

“We gave advertisements for allocation of coal blocks and invited applications…after the applications were received by us (Coal Ministry),the state governments were consulted and thereafter the coal blocks were allocated,” Coal Minister Sriprakash Jaiswal said.

“The coal blocks are allocated through a screening committee which is chaired by Coal Secretary,” he said,when asked to comment on media reports that Comptroller and Auditor General (CAG) in its draft report said that the government lost Rs 10.67 lakh crore by not auctioning coal blocks.

The issue of allocation of coal blocks was raised in Parliament and lead to disruption of proceedings in the Lok Sabha and the Rajya Sabha.

Jaiswal also said he did not receive any such report from CAG. “We did not receive any report of CAG then how can we say whether its report is right or not,” he said.

According to a media report,the CAG’s draft report said that the government benefited private and public sector companies by allocating them 155 coal blocks without auction between 2004-2009.

Jaiswal,however,said that the UPA-I started the practice of awarded coal blocks through advertisements,discontinuing the earlier practice.

He said that between 1993 and 2004 scores of coal blocks were awarded without issuing any advertisements.

The proposal for allocation of coal blocks through competitive bidding was mooted for the first time a couple of years ago. The government is framing guidelines and rules for the proposed competitive bidding for auction of coal blocks.

“The guidelines on coal block… are currently being examined. Views are also being sought from the concerned ministries on this and when the guidelines are ready then process of coal blocks auction would begin,” Jaiswal said.

He expressed optimism that the guidelines on coal blocks auction would be ready in two to four months.

Minister of State for Coal Shripratik Prakashbapu Patil had earlier said in the Lok Sabha that around 111 coal blocks have been allocated to various public/private sector companies from 1993-2006. Out this 111 coal blocks,29 have started production.

Govt has not received any final CAG report yet: Shukla

Government today declined to react on a CAG report on allotment of coal blocks in the country,saying no final report from the auditor has been received by it yet.

“Draft reports are never discussed in Parliament. No final report of the CAG has come to the government yet. Unless a final report comes to the PAC or the government,how could one react,” Minister of State for Parliamentary Affairs Rajiv Shukla told reporters outside Parliament.

He asked to comment on the draft report of the CAG on allotment of coal blocks in the country.

Parliament was rocked following the report of an alleged coal scam to the tune of Rs 10.67 lakh crore. The BJP has demanded a CBI probe into it.

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