PM says satisfied with coal block allocations despite inquiry

NEW DELHI (Reuters) - Prime Minister Manmohan Singh is satisfied with the outcome of the process of allocating coal blocks to certain companies, his office said on Saturday as the Central Bureau of Investigations (CBI) proceed with an investigation into the system.

The comments were the first attributed to Singh since a case was filed this week against three companies in a scandal, dubbed "Coalgate," which surfaced after an auditor's report last year questioning the government's practice of awarding coal mining concessions to companies without competitive bidding.

Critics allege the process has potentially cost the treasury billions of dollars in lost revenues. Opposition parties have called for Singh's resignation because he was in charge of the coal ministry when the allocations took place.

The controversy gathered further momentum this week after the CBI filed a case against industrialist Kumar Mangalam Birla and two other companies, saying they flouted rules in coal block allocations.

"The Prime Minister is satisfied that the final decision taken in this regard was entirely appropriate and is based on the merits of the case placed before him," Singh's office said.

"No impediment is being placed on the CBI to continue the investigation and seek fresh information which may have a bearing on the case."

India's federal auditor alleged that the government's under-priced sale of coal blocks may have cost the exchequer potential revenues of $33 billion, although industry watchers and the government have cast doubt on this figure.

The prime minister is alleged to have reversed decisions on allocations in response to recommendations from ministries.

Accusations of crony capitalism in allocating India's resources from coal to mobile telephone bandwidth have dogged Singh's government, which is now nearing the end of its second term in office.

A general election must be held by May next year.

(Reporting by Anurag Kotoky; Editing by Ron Popeski)