CAG to audit coal e-auction, results in 6 months

Audit will review the conditions set for the auctions as well as the reserve prices decided by the govt for various blocks

The Comptroller and Auditor General (CAG) of India will audit the recently concluded two rounds of coal block e-auction. The audit is likely to be completed in six months.

The audit would review the conditions set for the auctions and the reserve prices decided by the government for various blocks. Sources said details and files pertaining to the auction had been sought.

The audit is also expected to review the decision by the government to let companies put multiple bids through subsidiaries or various units.

Neither the CAG nor the coal ministry officially responded to queries on the audit.

The National Democratic Alliance (NDA) government had claimed that the auctions would generate Rs 2.85 lakh crore over the duration of the mining.

Two rounds of bidding for coal blocks were conducted between February 14 and March 8, 2015, and 40 mines were awarded. A decision to auction the mines was taken after the Supreme Court had in August 2014 cancelled 204 coal block allocated by the previous United Progressive Alliance and NDA governments.

Among the coal blocks earmarked for negative bidding for the power sector, all companies bid either at or below the reserve price of Rs 100 a tonne. The government had claimed this would save consumers Rs 90,000 crore in power bills. The power ministry had told the Central Electricity Regulatory Commission the revision of tariff should not lead to higher total tariff than what was permitted under the existing power purchase agreements.

In case of the unregulated sectors — steel, aluminium and iron ore — the auctions were done on the basis of forward bidding, with the highest bidder winning the block.

After reviewing nine winning bids, the coal ministry cancelled three blocks (won by two companies), claiming the bids had not attained a fair value but claimed the process had been transparent. The two companies, Jindal Power (with two blocks) and BALCO, moved the Delhi High Court to contest the government’s decision.

The bids for good quality blocks were in some cases found to be lower than the similar ones in other cases. Though the government cancelled the winning bids in three cases, it continued to claim that the companies were best placed to make their best bids and it was not for it to judge or review.

Apart from this, 41-odd cases have been filed by various companies on every step of the coal block re-allocation process. There have been independent requests to investigate the bidding of the players who bid too low or when bidding concluded in too less time.

The ministry is currently planning a third round of auction of blocks. It is also planning e-auction of coal linkages and also opening up some blocks to commercial mining.