CAG: Hole in exchequer; Govt: Process questionable

The CAG has also made an adverse observation on the screening committee mechanism followed by the government for examining applications received for allocation of captive coal blocks.

“There was nothing on record in the said minutes or the other documents indicating any comparative evaluation of the applicants for a coal block,which was relied upon by the screening committee. Thus,a transparent method for allocation of coal blocks was not followed by the screening committee,” the CAG said in the final report. The government sought to disagree with the auditor and even questioned the basis of the CAG’s estimate.

Coal minister Sriprakash Jaiswal said that the screening committee route for allocating the blocks “was the most transparent and best possible mechanism” for doing so. Describing the auditor’s view of purported gains by these companies as “misleading”,the minister said the computations were done based on questionable methodologies.

The CAG has arrived at the revised figure by excluding public sector companies and also underground (as opposed to open-cast) mines from its estimate. The average gain to the beneficiary companies are taken as the difference between the average sale price and cost of production per tonne for all grades of Coal India (CIL)-mined coal for 2010-11 plus an extra allowance for financing cost.

Questioning the findings of the CAG that part of the loss sustained could have accrued to the national exchequer had the government resorted to competitive bidding earlier for dishing out the blocks,Jaiswal said that the government did what appeared best before it while going ahead with allocations through this process. He ruled out any unfairness in allocations,and said the CBI is probing any irregularities and anyone found guilty would be dealt with strictly . The beneficiaries of the allocation process reportedly include companies such as the Essar Group,Jindal,Adani,ArcelorMittal and Tata Steel.

“There is no reason why we should have doubted the transparency of the committee. Headed by the coal secretary,the panel comprised of secretaries from the concerned ministries and officers of the rank of chief secretaries from the states besides chairman of CIL and the top brass of its subsidiaries,” Jaiswal said adding that of the 57 blocks the CAG referred to in its report,only one is operational.

As against the original draft where the entire 38 billion tonnes of the estimated reserves of these 57 blocks were considered extractable,the auditor in the revised report has placed the extractable reserves at 6.3 billion tonnes in cases where a mining plan is available. Where the plan is not available,73 per cent of the geological reserves for open-cast and 37 per cent for mixed mines were taken.

“If the block is not operative,how do you correctly access the reserve of the mine and calculate loss to the exchequer or gain for the company? If the auditor thinks that companies made windfall gains from allocations,then these blocks should have been under production,” Jaiswal said.

The CAG has excluded state-owned companies on the ground that their financial benefits are passed on to the exchequer and also excluded underground mines as it remains a loss-making business. In the case of mixed mines (both open-cast and underground),the CAG has considered only the open-cast component.