Govt's coal block valuation questioned

The Comptroller and Auditor General of India (CAG) has questioned the government's decision to use the price of non-washed coal to calculate the intrinsic value used in e-auction of coal blocks. Based on the decision of the Cabinet Committee on Economic Affairs, the notified price of Coal India was used for valuation of coal blocks.

Calculation of the intrinsic value is an important stage of the e-auction process. The extent of upfront amount payable by successful bidders, the floor price from which the bidding was to start for non-regulated sector coal mines, and the revised fixed rate for coal used for generation of power, were derived from the intrinsic value.

The CAG contended that washed coal should have been used for valuation as it was provided for in the mining plan.

The audit said there was undervaluation of 15 coal mines, which resulted in under-determination of upfront amount by Rs 381.8 crore, which is 41 per cent of the total upfront amount of Rs 932.4 crore. In six non-regulated sector coal mines, the floor prices were under-determined by amounts ranging between Rs 4.7 a tonne and Rs 1,264.4 a tonne. In all the nine power-sector coal mines, revised fixed rates, price for coal used for power produced for sale at merchant price, were under-determined by amounts ranging between Rs 32.2 a tonne and Rs 142.5 a tonne.

The CAG's calculation is based on the price at which Coal India subsidiaries sell to the customers. This price is higher than the notified price since it is for the washed coal.

In its response to CAG, the coal ministry said 15 cases of over-valuation had been identified by audit, but since the case of over-valuation would lead to higher upfront amount and larger revenue realisation, the ministry refrained from commenting on its accuracy.

The CCEA-approved methodology mandated that for the non-regulated sector constituting mainly steel, the floor price should be a minimum of Rs 150 a tonne notwithstanding the intrinsic value even if it was negative or less than Rs 150.