CAG picks holes in coal mines auction by NDA govt

The CAG has picked holes in the e-auction of coal mines by the NDA government last year saying multiple bids by corporate groups through joint ventures or subsidiaries did not give an assurance that potential level of competition was achieved in the first two tranches.
In a report tabled in Parliament today, the Comptroller and Auditor General of India (CAG) said competition may have been restricted in auction of 11 coal blocks on account of multiple bids by corporate groups made through JVs or subsidiaries.
"Audit could not draw an assurance that the potential level of competition was achieved during...Bidding of 11 coal mines auctioned in the first two tranches," it said.

In 11 out of 29 coal mines successfully e-auctioned in first and second tranche, a number of qualified bidders (QBs) in the e-auction stage were from the same company/parent subsidiary company coalition/joint venture (JV), CAG said.
In a scenario where the standard tender document (STD) allowed the participation of JV and simultaneously limited the number of QBs which could participate in the e-action, Audit could not draw an assurance that the potential level of competition was achieved during the stage II bidding of these 11 coal mines auctioned in the first two tranches.
In the third tranche, the Coal Ministry amended the clause of JV participation with the objective of increasing participation, it added.

Reacting on the report, an official source said that as only 6 per cent of the qualified bidders were joint ventures companies and only one successful bidder was a JV company, it is clear that this provision did not restrict competition.

"The Delhi High Court has upheld this provision of the auction. It has stated that the process is neither arbitrary or irrational or designed to favour any particular bidder and has worked out well," according to the source.
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CAG said there were errors in computation of floor price of 29 coal blocks auctioned in the first two tranches. It examined the records relating to computation of intrinsic value of 29 coal mines by CMPDIL.

It further said that under valuation of 15 coal mines, resulted in under determination of upfront amount by Rs 381.83 crore.
On being asked whether the auditor has recommended for cancellation of e-auction on account of inconsistencies and inaccuracies in the bidding process, Mala Sinha, Director General (Economic and Social Ministries), CAG said, "We have not recommended cancellation of e-auction".
Commenting on under valuation of coal mines an official source said that it was factually incorrect and based on faulty calculations. For example, in Jitpur CAG has assumed moisture content of 5 per cent whereas it is 6 per cent.

"CAG report displays limited conceptual understanding of the process. For example "deficiency" stated by the audit is non consideration of indirect taxes as these mines were for captive use. There was no sale of coal, no sale revenue and therefore no indirect taxes payable," the official source said.
CAG further said that out of the 42 schedule II mies, 39 blocks were operational and produced coal and were required to deposit additional levy. The prior allottees were required to deposit Rs 1,0165.12 crore against which Rs 6,628.56 crore only was collected as additional levy till May.
"Thus Rs 3,536.56 crore was pending as additional levy for collection from prior allottees," it said.