CoalMin’s weak guidelines led to BG lapses of Rs 311 cr: CAG

The Comptroller and Auditor General (CAG) has held the coal ministry responsible for allowing Bank Guarantees (BGs) worth more than Rs 300 crore to lapse by framing ineffective guidelines on ways to encash them in the event that the coal block allottees failed to develop their mines in a time-bound manner.

In its letter to the coal ministry on November 19, the CAG said that in the case of 15 coal blocks, the ministry allowed BGs worth Rs 311.81 crore to lapse. The letter added that the ministry failed to ensure timely renewal that could have penalised block owners who defaulted on assigned production commencement targets.

"The ministry may apprise the Public Accounts Committee (PAC) on the instances of lapse/non-renewal specifically linked to 15 blocks where BGs amounting to Rs 311.81 crore had lapsed and why were they allowed to lapse. The ministry may apprise the PAC as to who was responsible for framing ineffective guidelines for encashment of BGs till 2012 and what action has been taken for this lapse?" the CAG stated.

The statutory auditor added that the coal ministry in its reply to the PAC had stated that the BGs deductible could not be calculated and deducted as they were not linked to targets in case of allocations before 2007. In the same vein the ministry also stated that the inter-ministerial group (IMG) had recommended deduction of BGs in 14 cases.

The CAG asked whether these 14 cases were the same where BGs were linked to targets, and if so, the reason behind the ministry's delay in linking them and the person responsible for the delay.

The IMG in its meeting in June 2009 had recommended deduction of BGs for 15 blocks. But the coal ministry in reply to a Parliament question said it had ordered de-allocation of 21 blocks that were allotted to private companies and decided to deduct BGs of 18 companies.

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