11 JUN, 2012, ROHINI SINGH & SOMA BANERJEE, ET BUREAU
NEW DELHI: The Comptroller and Auditor General's final report on the allocation of coal blocks has concluded the government did not follow a transparent policy in selecting beneficiaries and was wrong in ignoring a 2004 recommendation by the secretary in the coal ministry that mines should be awarded through competitive bidding.
The report, whose conclusions were described to ET by people familiar with its content, will be presented to Parliament during the monsoon session. The people familiar with the report said the CAG has concluded that no information was available on how a company was chosen to mine a particular coal block.
A senior government official, among the people who described the key features of the report, said one of the CAG's core conclusions was that competitive bidding should have been adopted to allot coal mines instead of following what the government auditor describes as an "opaque" policy that remained in place in February 2012. The report says the potential gain to companies allotted blocks was Rs 1,86,000 crore, a number first reported by The Times of India. The beneficiaries include Jindal Steel and Power and a joint venture between the Tatas and South Africa's Sasol, among others.
Prime Minister Manmohan Singh headed the coal ministry during this period, aided by ministers of state (MoS) Dasari Narayan Rao and Santosh Bagrodia.
Parekh Presented Note Advocating Auctions
The coal secretary at the time, PC Parekh, conceded that there was "pressure" to allocate blocks to certain companies. "Yes, there was pressure and all kinds of people were coming and canvassing," he said. In 2004, Parekh had presented a note to the then MoS coal, Dasari Narayan Rao, calling for the adoption of competitive bidding for allocation of blocksin keeping norms of transparency.
Rao, a Telegu filmmaker and Congress-supported Rajya Sabha member till early this year, refused to comment on the allegations. The other MoS, Santosh Bagrodia, said that he had "nothing to do with all this," and said: "I will reply to the concerned people and not to the media." Coal minister Shri Prakash Jaiswal too declined to comment on the findings and final report of CAG saying he was unaware of the final report, and was yet to see a copy.
Explaining why the current policy of allocating blocks through a screening committee was problematic, Parekh said that applications had to be sponsored by state governments "...and bribes can be paid for the right decisions also". The screening committee deciding on the allocations is chaired by the coal secretary and has representatives from related ministries, such as power, steel, industry, and state governments.
CAG has alleged in its final report that that there was nothing on record in the minutes of the meetings of the screening committees or in any other document that indicated that the government had carried out comparative evaluation of applicants for a coal block. In other words, there is no clarity on how a company ended up with a particular coal block, said the government official quoted earlier.
"There were wide variations in the commercial value of coal mines, there was no way of making an objective decision," Parekh said. Claiming that there was no political will to go for competitive bidding, Parekh also said that industry had resisted the proposal, which was put on the backburner after the PMO raised objections in a note on September 11, 2004. "There weren't any serious objections (in the PMO note) except for a hike in the cost of power," he said.
Partha Bhattacharya, former chairman of CIL, said that while the objective of allocating mines to other companies apart from CIL was justified, as the state-owned monopoly could not meet demand, there could be objections with cement and steel companies getting the mine free but selling their products at market rates.
On the process of allocation, Bhattacharya said that he had not attended any of the screening committee meetings as there were no CIL blocks that were being given away to other parties.
The CBI has started an investigation into the alleged gains made by private companies, alleged irregularities in allocation and the role of the coal ministry.
According to a senior ministry official, who did not wish to be named, the government's objective at that point was only to increase coal production as CIL was unable to meet the rising demand. "Revenue generation from scarce natural resources as has been suggested by the Supreme Court in its order on 2G played no role at that point."
Admitting that some erroneous allocations were made in cases where the committee had failed to judge the financial and technical credibility of the applicant, he said that the coal ministry has cancelled 25 such allocations and is willing to cancel more if there was sufficient proof against the allotted company.
Quoting the February 2012 Supreme Court judgement on 2G spectrum that has called for transparency and competition in allocation of scarce natural resources, the CAG report has said that the coal ministry's attempts during 2004-06 to introduce competitive bidding were on the same lines, according to the government official in the know who shared information with ET.
The report has concluded that private companies have gained due to the delay in introducing competitive bidding. Based on an average cost of production and an average price of coal sold by CIL from open cast mines, the audit has estimated financial gains of Rs 1.86 lakh crore. Part of this, the report states, could have accrued to the government.
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