Tender clause change costs Rs 1,500 crore to Chhattisgarh exchequer: CAG report

Chhattisgarh government allegedly favoured Adani group in unwarranted amendment in tender condition for payment of coal mining fee that caused a potential loss of about Rs 1,500 crore to the state exchequer.

Adani Enterprise Limited (AEL) and the state-run Chhattisgarh State Power Generation Company (CSPGC) had formed a joint venture company (JVC) to develop, mine and transport coal from Parsa coal block in Sarguja to latter's Janjgir-based Marwa Thermal Power Project. The block under Hasdeo-Arand coalfields allotted to CSPGC in 2006 has an estimated reserve of 150 Million Tonnes.

Though Parsa was an unexplored coal block, but as per the Regional Exploration Report of the Geological Survey of India, the overall quality of coal in the area was of D to E grade. The tender invited for Coal Mining and Service Agreement (CMSA) mentioned the rate for the lowest F grade of coal.

During the pre-bid conference, the AEL raised a query regarding the applicable basic price of coal, if after detailed, exploration, the quality of coal was found to be better quality (say E) than F grade coal. The CSPGC clarified that the discount would be applicable on price of actual grade of coal instead of F grade coal.

"Since the role of the JVC was only to develop, mine and transport the coal to the power plant of the company (irrespective of the grade of coal) for which it had quoted the rate, passing of the benefit of higher grade coal (i.e. D and E) to the JVC was not justifiable particularly in view of the fact that the company is the owner of the mine and whatever grade of coal was extracted, the same would be used for its own consumption," Comptroller and Auditor General (CAG) report for 2012 said.

The report was tabled Friday in the Chhattisgarh Legislative Assembly. The Leader of Opposition, Ravindra Choubey said it was unfortunate that the government tabled the report on the last day of the budget session to evade discussion on it.

"Thus, by changing the pricing clause in the tender, the company had extended undue benefit to the JVC," the CAG report said, adding that because of this unwarranted amendment, the company is likely to lose Rs 1,549.04 crore during the entire period of the CMSA.

The CAG officials later explained that the JVC was to get the price for F grade coal as mentioned in the tender. Since the reserve had D and E grade coal that had higher price, the JVC was paid for higher grade by changing the clauses mentioned in the tender that resulted in a huge loss.

The report citing the government version on the issue said that the company's decision to change the pricing clause from F grade to actual grade of coal was a vendor neutral decision. It was also stated that the calculation regarding loss to the company is based on audit's assumption that Parsa is having superior grade coal. "This calculation is arbitrary because based on the geological report prepared by Adani Mining Private Limited after detailed exploration, it is proved that the combined grade of seams of coal at Parsa is of F grade," the government said.

The AEL however did not respond to the mail sent for its version on the issue.