<p>When the Comptroller and Auditor General (CAG) came out with its report in November, 2010 on allocation of second generation telecom spectrum and put the presumptive loss the national exchequer suffered at a whopping Rs 1.76 lakh crore, not many expected another notional loss of mammoth proportions. </p>.<p>Within two years, the auditing agency has come out with another damning report, this time on allocation of coal blocks, and loss to treasury even bigger, a massive Rs 1.86 lakh crore! <br /><br />According to CAG, this loss would not have happened had the allocation been done on the basis of competitive bidding rather than through discretionary process.<br /><br />While the 2G swindle led to the imprisonment of then telecom minister A Raja and several corporate bigwigs (since released on bail), the CAG report on coal threatens to shake Prime Minister Manmohan Singh himself. For, a substantial part of the period when coal blocks were distributed through the process of discretionary allotment during 2004-2009, Singh had retained the coal portfolio and the buck stops with him (criminal culpability of anyone has not been established and the Central Bureau of Investigation probe is on). Principal Opposition BJP has not let the chance go by as it paralysed Parliament demanding his resignation.<br /><br />Singh attempted to answer in Parliament the slew of questions raised in the report but could not complete his statement in the din. Rather than silencing the critics, the PM’s four-page statement, as a rebuttal to the 57-page CAG findings, raises more questions.<br /><br />The prime minister failed to refer to the issues raised by then coal secretary P C Parakh who pointed at “windfall gains” to private players if allotment was based on nomination. Consistent in his notings, Parakh observed on July16, 2004 that “…since there is a substantial difference between price of coal supplied by (the state-run) Coal India Limited and coal produced through captive mining, there is a windfall gain to the person who is allotted a captive block..” For this a PMO note said on September 11, 2004 that there were “certain disadvantages of allocation of coal blocks through competitive bidding.” <br /><br />Parakh reiterated his stand on September 25, 2004 saying that there was “hardly any merit in the objections raised (by the PMO).” CAG pointed out that the screening committee, consisting of Union ministries and state government representatives, did not follow “transparent method for allocation..” It said there was nothing on record in the committee meetings or in documents, to show evaluation of the firms selected to mine blocks. The government auditor pointed out that , “in all, since July 2004, 142 coal blocks were allocated to various government and private parties following the existing process of allocation. This allocation lacked transparency and objectivity.”<br /><br />The prime minister did not reply directly to this conclusion but said: “The applications were assessed on parameters such as the techno- economic feasibility of the end use project, status of preparedness to set up the end use project, past track record in execution of projects, financial and technical capabilities of applicant companies, recommendations of the state governments and the administrative ministry concerned.” <br />(As per law, only captive use of coal in notified sectors such as iron and steel power and cement is allowed, it cannot be sold except by the CIL).<br /><br />There is a flip-flop by the law ministry, then headed by present Karnataka Governor H R Bhradwaj, on its advice to the coal ministry over auction. Three times it pointed out competitive bidding could be done through administrative instructions and once it favoured change in Mines and Minerals (Development and Regulation) Act was required, as found by CAG. Two years were lost in this. In his statement, the prime minister ignored the first three and chose the last.<br /><br />Then comes the issue which the prime minister mentioned more than once in the course of his speech – that the states ruled by non-Congress parties, including four of the BJP, opposed auction. However, as Rajya Sabha Opposition leader Arun Jaitley pointed out, coal being a major mineral, is a Central subject and the Union Government could have gone ahead if it was keen. Sriprakash Jaiswal, present minister of state for coal, admitted in Parliament on December 21, 2009 that majority of the states had agreed to the competitive bidding process.<br /><br />The first proposal for auction was made in 2004 but till today, no block has been allocated on auction. After a huge delay by various agencies of government, Parliament passed the MMDR Act in 2010, providing for auction. But then, rules for auction of coal mines were notified only on February 2, 2012, a full 17 months later! The prime minister is silent on this valuable time lost too.<br /><br />For most of the allocated blocks, the normative production schedule fixed by the coal ministry was June 30, 2011 and in a majority of the 96 blocks, the time overrun was ranging from five to 10 years!<br /><br />While the BJP has demanded that all the blocks allocated to the private firms be cancelled, an inter-ministerial group (IMG) is understood to have recommended cancellation of the allotment of 53 coal blocks for not beginning prescribed work on the mines. In 17 of these 53 blocks, minimum process like land acquisition has not been started by the allottee firms. Of the total 57 blocks allotted to private firms, production has begun in only one of them – by Electrosteel Castings Limited in Jharkhand.<br /><br />The BJP may have demanded resignation of the prime minister but the party cannot absolve itself of the blame. Its two chief ministers – Raman Singh of Chhattisgarh and Shivraj Singh Chouhan of Madhya Pradesh – have been accused of recommending allocation of blocks to private firms. The Congress has charged the Odisha’s Biju Janata Dal government of recommending 42 blocks to private firms. The Congress has alleged that the Chhattisgarh chief minister favoured SMS Infra of BJP MP Ajay Sancheti and Pushp Steel while the Madhya Pradesh chief minister opted for a couple of firms, including Sasan project of industrialist Anil Ambani. As for the future, the government is yet to put in a mechanism for competitive bidding. The latest from the government is that analytical agency Crisil has been appointed to suggest a system for a fair bidding process on the lines of the National Exploration Licensing Policy for oil and gas assets. There will also be a regulator for the sector. If all goes well, the auction for coal blocks can start next year.</p>.<p>RELATED STORIES </p>.<p><a href="../content/275823/parakh-may-add-more-coal.html">Parakh may add more coal to the fire</a> </p>.<p><a href="../content/275821/cag-has-not-crossed-lakshmanrekha.html">CAG has not crossed the Lakshmanrekha</a> </p>
<p>When the Comptroller and Auditor General (CAG) came out with its report in November, 2010 on allocation of second generation telecom spectrum and put the presumptive loss the national exchequer suffered at a whopping Rs 1.76 lakh crore, not many expected another notional loss of mammoth proportions. </p>.<p>Within two years, the auditing agency has come out with another damning report, this time on allocation of coal blocks, and loss to treasury even bigger, a massive Rs 1.86 lakh crore! <br /><br />According to CAG, this loss would not have happened had the allocation been done on the basis of competitive bidding rather than through discretionary process.<br /><br />While the 2G swindle led to the imprisonment of then telecom minister A Raja and several corporate bigwigs (since released on bail), the CAG report on coal threatens to shake Prime Minister Manmohan Singh himself. For, a substantial part of the period when coal blocks were distributed through the process of discretionary allotment during 2004-2009, Singh had retained the coal portfolio and the buck stops with him (criminal culpability of anyone has not been established and the Central Bureau of Investigation probe is on). Principal Opposition BJP has not let the chance go by as it paralysed Parliament demanding his resignation.<br /><br />Singh attempted to answer in Parliament the slew of questions raised in the report but could not complete his statement in the din. Rather than silencing the critics, the PM’s four-page statement, as a rebuttal to the 57-page CAG findings, raises more questions.<br /><br />The prime minister failed to refer to the issues raised by then coal secretary P C Parakh who pointed at “windfall gains” to private players if allotment was based on nomination. Consistent in his notings, Parakh observed on July16, 2004 that “…since there is a substantial difference between price of coal supplied by (the state-run) Coal India Limited and coal produced through captive mining, there is a windfall gain to the person who is allotted a captive block..” For this a PMO note said on September 11, 2004 that there were “certain disadvantages of allocation of coal blocks through competitive bidding.” <br /><br />Parakh reiterated his stand on September 25, 2004 saying that there was “hardly any merit in the objections raised (by the PMO).” CAG pointed out that the screening committee, consisting of Union ministries and state government representatives, did not follow “transparent method for allocation..” It said there was nothing on record in the committee meetings or in documents, to show evaluation of the firms selected to mine blocks. The government auditor pointed out that , “in all, since July 2004, 142 coal blocks were allocated to various government and private parties following the existing process of allocation. This allocation lacked transparency and objectivity.”<br /><br />The prime minister did not reply directly to this conclusion but said: “The applications were assessed on parameters such as the techno- economic feasibility of the end use project, status of preparedness to set up the end use project, past track record in execution of projects, financial and technical capabilities of applicant companies, recommendations of the state governments and the administrative ministry concerned.” <br />(As per law, only captive use of coal in notified sectors such as iron and steel power and cement is allowed, it cannot be sold except by the CIL).<br /><br />There is a flip-flop by the law ministry, then headed by present Karnataka Governor H R Bhradwaj, on its advice to the coal ministry over auction. Three times it pointed out competitive bidding could be done through administrative instructions and once it favoured change in Mines and Minerals (Development and Regulation) Act was required, as found by CAG. Two years were lost in this. In his statement, the prime minister ignored the first three and chose the last.<br /><br />Then comes the issue which the prime minister mentioned more than once in the course of his speech – that the states ruled by non-Congress parties, including four of the BJP, opposed auction. However, as Rajya Sabha Opposition leader Arun Jaitley pointed out, coal being a major mineral, is a Central subject and the Union Government could have gone ahead if it was keen. Sriprakash Jaiswal, present minister of state for coal, admitted in Parliament on December 21, 2009 that majority of the states had agreed to the competitive bidding process.<br /><br />The first proposal for auction was made in 2004 but till today, no block has been allocated on auction. After a huge delay by various agencies of government, Parliament passed the MMDR Act in 2010, providing for auction. But then, rules for auction of coal mines were notified only on February 2, 2012, a full 17 months later! The prime minister is silent on this valuable time lost too.<br /><br />For most of the allocated blocks, the normative production schedule fixed by the coal ministry was June 30, 2011 and in a majority of the 96 blocks, the time overrun was ranging from five to 10 years!<br /><br />While the BJP has demanded that all the blocks allocated to the private firms be cancelled, an inter-ministerial group (IMG) is understood to have recommended cancellation of the allotment of 53 coal blocks for not beginning prescribed work on the mines. In 17 of these 53 blocks, minimum process like land acquisition has not been started by the allottee firms. Of the total 57 blocks allotted to private firms, production has begun in only one of them – by Electrosteel Castings Limited in Jharkhand.<br /><br />The BJP may have demanded resignation of the prime minister but the party cannot absolve itself of the blame. Its two chief ministers – Raman Singh of Chhattisgarh and Shivraj Singh Chouhan of Madhya Pradesh – have been accused of recommending allocation of blocks to private firms. The Congress has charged the Odisha’s Biju Janata Dal government of recommending 42 blocks to private firms. The Congress has alleged that the Chhattisgarh chief minister favoured SMS Infra of BJP MP Ajay Sancheti and Pushp Steel while the Madhya Pradesh chief minister opted for a couple of firms, including Sasan project of industrialist Anil Ambani. As for the future, the government is yet to put in a mechanism for competitive bidding. The latest from the government is that analytical agency Crisil has been appointed to suggest a system for a fair bidding process on the lines of the National Exploration Licensing Policy for oil and gas assets. There will also be a regulator for the sector. If all goes well, the auction for coal blocks can start next year.</p>.<p>RELATED STORIES </p>.<p><a href="../content/275823/parakh-may-add-more-coal.html">Parakh may add more coal to the fire</a> </p>.<p><a href="../content/275821/cag-has-not-crossed-lakshmanrekha.html">CAG has not crossed the Lakshmanrekha</a> </p>
