Uproar over report on coal loss,CAG calls it very ‘misleading’

CAG denies report that its draft report had claimed a loss to exchequer due to discretionary allotment of coal blocks.

Written by ENS Economic Bureau | New Delhi | Published: March 22, 2012 10:07:48 pm

THE Comptroller and Auditor General today denied a report in The Times of India that its “draft” report had claimed a Rs 10.67-lakh crore loss to the exchequer due to discretionary allotment of coal blocks — instead of an auction — to private and state-owned companies between 2004 and 2009.

The report set off a furore in Parliament after which CAG Vinod Rai wrote a letter to Prime Minister Manmohan Singh that the report was “exceedingly misleading…”(at) a very preliminary stage and does not even constitute our pre-final draft”.

He said: “Pursuant to clarification provided by the (Coal) Ministry in exit conferences held on February 9,2012 and March 9,2012,we have changed our thinking.”

In the two exit conferences the CAG referred to in its letter to the PM,the coal ministry rebutted the the auditor’s queries on the presumptive loss. It said that a majority of the coal blocks (around 137 of the 155 acreages) were handed out as captive blocks to companies in the power,cement and steel sectors. The coal produced from these blocks could not be sold in the open market for commercial purposes. The allocattee was the sole end-user.

Of the 137 blocks,62 were allocated to power generators,where tariffs are regulated on the basis of input costs. Lower pricing of coal translates into lower tariffs for end-consumers,the ministry argued. In the case of steel and cement sectors,while the prices of end products are not regulated,market dynamics sufficiently ensure that companies cannot arbitrarily increase prices in an ad hoc manner,the Ministry told the CAG.

When contacted,coal minister Sriprakash Jaiswal squarely denied any communication or report from the CAG pertaining to “monetary losses”. He said that quantifying the losses on account of handing over blocks without auctioning was not an easy job as the blocks were never given at a single go but spread over 10 years.

Ministry officials argued blocks were primarily given to end-use industries for ensuring raw material security since commercial mining of the fuel is banned. They said no revenue was generated by the government by giving away these coal blocks,so there was no question of any wrongdoing. The fact that coal blocks should be auctioned is already in the ministry’s scheme of things. It has initiated the move to institutionalise the auctioning process for coal blocks and has secured the Cabinet approval for the same.

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