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Undue benefits due to absence of clear rules on usage of surplus coal: CAG

The final audit report on ultra-mega power projects has rapped the government and the Power Finance Corporation for allowing diversion of coal by some of the private sector entities

Written by ENS Economic Bureau | New Delhi |
August 14, 2012 1:11:53 am

The final audit report on ultra-mega power projects has rapped the government and the Power Finance Corporation for allowing diversion of coal by some of the private sector entities.

The report by the comptroller and auditor general has asserted that not spelling out the terms of the usage of surplus coal right upfront has contributed to accruing undue benefits to the allotees “to the detriment of the ultimate power consumers.”

Coal ministry stated in February,2012 that the blocks were allocated on the basis of requirement as assessed by the power ministry. However,the mine capacity depends on the finalisation of Mining Plan and the surplus coal is required to be disposed off as per the existing guidelines and terms and conditions of the letter,according to the draft report. The government did not stipulate this upfront in the allotment letter or guidelines or otherwise”.

This ambiguity allowed bidders like Reliance Power to interpret the clauses for usage of the surplus coal and vitiated the process of allocation,observes the report.

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The report is a set of three CAG documents that the finance ministry will table this week in Parliament. The others are on Coal India that raps the government for mis-allocation of coal blocks to a host of companies. Those allocated include private power producers like Tata,JSPL and Adani group. The other is on DIAL.

On the UMPP,the report says subsequent decision to allow RPL to use the surplus coal meant the company did not need to factor into value of the surplus coal while offering the bid price for the sale of power. The report has pegged undue benefits to RPL for Sasan and Tilaiya UMPP at Rs 15,849 crore,“out of which the estimated undue benefit that ‘may accrue’ to RPL over Tilaiya UMPP would be Rs 10,974 crore and Sasan UMPP would be Rs 4,875 crore over a period of 25 years.”

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