Coal blocks biding loss at Rs 1.86 lakh cr

A whopping gain of Rs 1.86 lakh crore is likely to accrue to private companies, including Tata Steel, Essar Power, JSPL, Hindalco and Adani Power from allocation of 57 coal blocks without competitive bidding, a CAG report said on Friday.

"Delay in introduction of the process of competitive bidding has rendered the existing process beneficial to the private companies. Audit has estimated financial gains to the tune of Rs 1.86 lakh crore likely to accrue to private coal block allottees," according to the CAG report placed in Parliament today. These mines were allocated between 2005 and 2009.

The Comptroller and Auditor General (CAG) said it has arrived at the estimates based on the average cost of production and average sale price of opencast mines of Coal India in the year 2010-11.

"The government could have tapped a part of this financial benefit by expediting decision on competitive bidding for allocation of coal blocks," the report said.

It could have accrued to the national exchequer by operationalising the decision taken years earlier to introduce competitive bidding for allocation of coal blocks, it added.

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Rejecting the report, Coal Minister Sriprakash Jaiswal said, the "allocation process was totally transparent and the policy was right". However, if at all there is any irregularity, "then CBI is inquiring into the matter".

There was no specific criteria for allocation of coal blocks in the country till 1993. From 1993 onwards, Ministry of Coal started awarding blocks to private parties for captive mining on recommendations of the Inter-Ministerial Screening Committee or through direct allocation.

The concept of allocation of captive coal blocks through competitive bidding was first announced in 2004.However, the government is yet to finalise the modus operandi of the mechanism. In the mean time, 194 coal blocks were allocated to different government and private parties up to March 31, 2011.

The official auditor said it is "of strong opinion that there is a need for strict regulatory and monitoring mechanism to ensure that benefit of cheaper coal is passed on consumers".

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To bring objectivity and transparency in the allocation and for tapping of a part of benefit for accruing to the allottees of captive coal blocks, the CAG said the Coal Ministry should "urgently" work out modalities to implementthe procedure of allocation of coal blocks for captive mining through competitive bidding.

The CAG also said Coal India has suffered production losses to the tune of 116 million tonnes (MT) on account of delays in execution of new projects, government auditor CAG today said.

Delays ranging from "one to 12 years" in execution of 32 projects under different subsidiaries of CIL entailed "loss of production by 115.95 MT," it said.

The CAG said a system of giving "incentives" to encourage the production performance from captive coal clocks and "disincentives" to discourage poor performance should be evolved.