CAG Says Coal Blocks Allocated At Throw Away Prices: Loss Of 1.86 Lakh crore

The (CAG) controller and audited general’s Final report says that 44 billion tonnes of coal was given away at throw-away prices, while 194 coal blacks were allocated on mere recommendations. The coal blocks were allotted to private parties through the process which lacked transparency, objectivity and competition. The Comptroller and Auditor and General of India (CAG) in its final report pegged the losses of the coal mine allocation at Rs 1.86 lakh crore.  This is biggest scam after the latest 2G scam which was of Rs 1.76 lakh crore.

CAG in its final report came up with the name of 25 private companies which were primary beneficiaries of the allocated coal blocks including Adani Power, Essar Power, Hindalco, Tata Steel, Jindal Steel and Power,  Jaiprakash power, Reliance infrastructure, Tata power, Reliance Power etc. After the CAG report accused the government of favoritism and benefiting companies like Tata and Reliance Power.

This all began in the year 2004 when government introduced the concept of allocation of captive coal blocks through competitive bidding and did not finalise the modus operandi of competitive bidding. This resulted into allocating coal blocks without any evaluation and on nomination basis instead of competitive bidding process. The delay in the introduction of the process of competitive bidding has turn into the existing process beneficial to the private companies

Reliance power tanked sharply on Friday after the report mentioned that the company benefited the most from the government’s decision of allowing to use excess coal from its captive mines for another project it was not meant for. CAG has also alleged the government for showing favoritism and provided benefits to few more companies like TATA.  As per the media reports the CAG has alleged that government granted permission to the Reliance power to utilise the surplus coal from three mines attached to the projects of Reliance power in Madhya Pradesh. The report mentioned that “The permission to use surplus coal in other projects of the bidder after award of the contract based on acceptance of the lowest tariff, vitiated the sanctity of the bidding process which would result in post bid concessions to the developer having significant financial implication," This resulted into undue financial benefit of Rs 29,033 crore with a net present value of Rs 11,852 crore to the project developer (RPL)," the official auditor said.  

Apart from accusing the government to provide benefits to the private power companies by delaying the competitive bidding process CAG also alleged of delaying the execution of the coal projects of Coal India Ltd.  CAG reports states that because of the delay CIL has suffered the production loss of 116 mn tonnes. And it mentioned that these delays were done despite setting up an expert committee to speed up the clearance process. However, the coal ministry stated in the media that "response from ministry of environment and forest is awaited.

We would like to conclude that this report is placed in the parliament and it may take time for the government to take some strict actions on the alleged parties. However this will keep the markets on the edge in the short term especially for the stocks which have been named in the reports. And one has to wait and watch how the report is taken up here on. If it goes to the Central Bureau of Investigation (CBI), then it will dampen sentiment