Pvt players may have gained Rs 1.86 lakh cr on allotments sans competitive bidding

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In a toned down report compared to its draft, the Comptroller and Auditor General said the delay in the introduction of competitive bidding for allocation of coal blocks “led to financial gains to the tune of Rs 1.86 lakh crore to 57 mine owners.”

The ‘illustrative calculation,’ down from Rs 10.67 lakh crore in the draft report, is based on average cost of production and sale price of open cast mines operated by Coal India Ltd. The competitive bidding could have been introduced in 2006, CAG said in its report tabled in Parliament on Friday.

Alternative route

The Government took an alternative route, where a Screening Committee with representatives from various Ministries, decided on allocation of coal blocks.

“However, there is nothing on record in the said minutes or in other documents indicating any comparative evaluation of the applicants for a coal block, which was relied upon by the Screening Committee. Thus, a transparent method for allocation of coal blocks was not followed by the Screening Committee,” the auditor pointed out. The companies that have been awarded these mines under scrutiny remained tight-lipped. The companies that bagged blocks include Tata Power, Essar Power, Hindalco, JSPL, Adani Power, Monnet Ispat, JSW Steel, DB Power, Tata Steel, Ultratech, BALCO, Grasim Industries and CESC, among others. CAG has also taken a dig at public sector miner Coal India. The auditor said that production from underground mines is stagnant around 43 million tonnes from 2006-07 till 2009-10. It further decreased to 40 million tonnes in 2010-11.

The Government auditor, which claimed it has taken a conservative basis and considered inputs from Coal Ministry while formulating the final report, says captive mines not producing is a serious concern. Only one of the 57 blocks scrutinised is producing. Only 25 captive mines given prior to 2004 are in producing state.

In all, since July 2004, 142 coal blocks were allocated to various Government and private parties following the existing process which lacked transparency, objectivity and competition.

Financial benefit

The difference between draft report figures and the final is because financial benefit to Government companies has been excluded. Also, financial benefits of only open cast and not underground mines have been considered and extractable reserve has been taken as per the mining plan wherever available, CAG admitted.

The auditor has pointed out the need to implement transparent competitive bidding mechanism for mine allocation.

Also, Coal India should fix its production targets in line with Planning Commission figures.


(This article was published in the Business Line print edition dated August 18, 2012)
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