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Sasan coal diversion before EGoM today

BS Reporter  |  New Delhi 

Tomorrow, an Empowered Group of Ministers (EGoM) is to discuss the issue of diversion, with government permission, of surplus coal by Reliance Power Ltd (R-Power), meant for its 4,000-Mw Ultra Mega Power Project (UMPP) at Sasan in Madhya Pradesh, to another project being developed by it, Chitrangi, in the same state.

A recent draft report of the Comptroller and Auditor General of India (CAG) had alleged the government's decision to allow the coal diversion had caused a !Rs 15,849 crore financial benefit to the company, part of the Anil Dhirubhai Ambani Group. The draft report was quoted in a The Times of India report on March 22; it spoke of undue benefits through allotment of 155 coal blocks to various

In a letter to Prime Minister Manmohan Singh the same day, the CAG had downplayed the draft report, saying “The details being brought out were observations under discussion at a very preliminary stage and do not even constitute our pre-final draft and, hence, are exceedingly misleading.”

The EGom, in its earlier meeting in December, had decided to seek legal opinion from Attorney General (AG) Goolam E Vahanavati on the matter. The AG had reportedly felt if the government wanted to revoke permission for the diversion, it would have to show the company violated the norms which allowed it to use incremental coal.

CAG’s audit report had said the government permission for R-Power to use excess coal from mines allotted for Sasan, subsequent to execution of contract agreements, vitiated the sanctity of the bidding process for the project.

R-Power had contested the allegation. “The government’s right to grant permission is built in to the coal block allocation letter of Sasan that were made available to all bidders prior to bid submission. Hence, there is no change in commercial conditions after award of UMPP. So, the issue of undue benefit does not arise at all,” it had said in a presentation made to the CAG this February.

The company also said there was a strong legal basis for the award of incremental coal, citing the Colliery Control Rules, 2004, empowering the government to provide approval for utilisation of surplus coal. An EGoM had in 2008 approved the diversion, subject to conditions. These included providing Sasan priority in use of coal from the allotted blocks — Moher, Moher Amlori Extn and Chhatrasal — and sale of power generated from surplus coal only through bidding.

The company also said there was no rationale behind CAG’s methodology for arriving at the ‘undue benefit’ figure of Rs 40,000 crore. CAG had quantified the difference between Reliance Power’s cost of production and notified sale price of Coal India, extending it over 28 years for arriving at the loss figure.

First Published: Sat, April 28 2012. 00:42 IST
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