The Comptroller and Auditor General (CAG)’s allegations that the government provided undue benefits to private companies in coal block allocation are not limited to the bidding method. In its report tabled in Parliament on Friday, the government auditor also said excess coal reserves may have been allocated to companies.
This assumes significance because the government has, as its principal defence, been arguing that every tonne of coal allocated to companies under the captive mining policy was accounted for.
“There is a possibility of surplus coal (allocation) from the captive coal blocks,” CAG said under the head ‘Excess Allocation of Coal’ in its report. The auditor has alleged that the government’s decision to allow Reliance Power to divert surplus coal from mines allocated for its Sasan ultra mega power project (UMPP) to the Chitrangi power project in Madhya Pradesh would lead to undue financial gain of Rs 29,033 crore to the Anil Dhiru-bhai Ambani Group company.
According to CAG, surplus coal could result if production materialises before the commissioning of the end-use project for which the block has been allotted, or if production outpaces requirement in a project.
Besides, CAG has, in its report, also pulled up the government for not resorting to an international method of estimating coal reserves — United Nations Framework Classification (UNFC) — even though a decision to do away with the obsolete Indian system, the Indian Standard Procedure (ISP) 1956, was taken as early as 2001. This has deprived the domestic companies of information on whether or not the extraction of reserves is economically amenable, according to the auditor.
The government is already planning to issue policy guidelines on surplus coal, fearing profit-making by private miners through sale of such coal produced at captive mines. Under its new policy, the government is likely to ask captive miners to sell surplus coal to state-owned Coal India Ltd without any margin.
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An Empowered Group of Ministers headed by the then finance minister Pranab Mukherjee had, in April this year, decided to stand by an earlier decision to allow Reliance Power to divert surplus coal produced from mines allotted for its Sasan project.
An official said the coal ministry feared private companies with captive mines would start producing surplus coal deliberately to make profits, thereby circumventing the existing law which does not allow them to profiteer through coal sales. According to the Coal Mines Nationalisation Act, production of surplus coal should not result in undue advantage to the allocatee and any additional production should be made available to the government for utilisation.