The Comptroller and Auditor General of India (CAG) on Friday accused the government of allocating coal blocks, ultra mega power projects and land for the Delhi airport at a fraction of market prices, potentially causing a total Rs 2.18 lakh-crore loss to the exchequer.
While an angry Opposition held the Prime Minister “directly responsible” and asked him to “consider resignation”, the government contested the CAG’s charges, saying the auditor was “going beyond its mandate”.
Private companies labelled as beneficiaries in the three CAG reports tabled on Friday in Parliament reacted sharply, with Reliance Power saying the audit observations did not take into account the “national interest to augment domestic coal production”. In its defence, the GMR-controlled Delhi International Airport Ltd (DIAL) cited a November 2006 Supreme Court verdict that had upheld the bid process as “valid and correct”. The stocks of these companies fell sharply.
The report on coal allotment was the most damaging as the CAG alleged the government passed on financial gains of Rs 1.86 lakh-crore to private coal block allottees by not opting for the bidding process. The figure is higher than the Rs 1.76 lakh-crore loss cited in the CAG’s report on telecom spectrum allocation. It said the procedure followed for allocation of coal blocks to captive consumers was done merely on recommendations from state governments and other administrative ministries “without ensuring transparency and objectivity”. The estimate of loss is based on the average cost of production and the average sale price of open cast mines of the government-owned Coal India. (Click for charts & tables)
There has been no bidding followed till date for any minerals in the country except crude oil & gas and coal bed methane. A legislative amendment to permit the bidding of coal blocks has been passed but a bidding round is yet to start. “It was only the UPA-I government which in 2004 first considered the allocation of coal blocks through the competitive bidding route,” a coal ministry statement said. Allocation of coal blocks for captive use commenced in 1993 after an amendment in the Coal Mines (Nationalisation) Act, 1973 through the screening committee route, which has come in for attack.
Prime Minister Manmohan Singh was officiating as the coal minister twice from 2004 onwards during which period the allocation of coal blocks happened. Sushma Swaraj, leader of the Opposition in the Lok Sabha, said, “The Prime Minister now cannot hide behind any argument. No Raja or Chidambaram can be used as a shield as in the 2G case.”
V Narayanasamy, minister of state in the Prime Minister’s Office, defended the PM, saying the CAG was not following its mandate. Coal Minister Sriprakash Jaiswal questioned the loss estimate, saying only one block out of 57 allotted started production.
In the report on UMPPs, the CAG said Reliance Power would gain Rs 29,033 crore by diverting coal from its Sasan project to the Chitrgani project, both in Madhya Pradesh. Though the government and the company have taken a view that it happened after approval by the empowered group of ministers, the CAG has recommended a review of the allocation of a third coal mine (Chhatrasal) for Sasan.
The report on privatisation of the Delhi airport said an alleged gain of an estimated Rs 3,400 crore accrued to DIAL. The aviation ministry, now under Ajit Singh, said its views had not been incorporated in the final report of the CAG and there were aspects in the report that were neither included in the draft audit report nor discussed with the ministry at any point in time.
The CAG recommended the constitution of an empowered group along the lines of the Foreign Investment Promotion Board as a single-window mechanism to grant clearances such as mining lease, mining plan, forest clearance, environment management plan and land acquisition for accelerating the procedures for commencement of production.