The Karnataka Power Corporation Limited (KPCL), which faces a CBI probe in coal scam, had also earned the wrath of Comptroller and Auditor General (CAG) for the irregularities in managing the coal blocks allocated to it.
The government auditor felt that the objective of generating cheaper power by using fuel from own mines, thereby providing electricity to consumers at lesser cost, was not achieved.
It also felt that the formation of joint venture company was defeated as it functioned as a “shell” company with the entire mining operations being sub-contracted to Eastern Minerals & Trading Agency (EMTA), the majority partner. Another criticism in the report was about the pecuniary benefits EMTA got as the coal was bought at a higher price. It also noted that the entire mining operations were sub-contracted to EMTA through an agreement between joint venture KECML and EMTA.
“The basis of the above arrangement as to the cost of mining is not clearly explained. In this arrangement, the JV was merely booking expenses based on claims received from EMTA and had no basis of knowing the actual cost of mining. Consequently, KPCL had no definite knowledge of the transactions and cost incurred thereon,” the CAG had said.
In its report, which was also tabled in the Karnataka Assembly on February 26, 2014, the CAG had found “inconsistencies and shortcomings” in pre-tender process as well as joint venture agreement and its implementation. The auditor questioned how the joint venture could be formed in February 2002 when the coal blocks were actually allotted only in November 2003 and before the grade of coal was known.
“The stake of partners in the JV company also changed from what was originally decided. The company assessed its right on the KPCL Coal Mines at Rs 1.30 crore, which was considered as 26 per cent of the share capital, though a conservative estimate shows the value of coal reserves to be of the extent of Rs 9,272.58 crore,” the report said.In another observation, it said, ETMA and five other bidders had not cleared the pre-qualification stage but were allowed to enter the race along with New Delhi-based Sainik Transporters Pvt Ltd for being part of the joint venture.
