There’s more to the controversy surrounding the leaked draft report of the Comptroller and Auditor General of India (CAG) on coal block allocations than just the alleged Rs 10.6-lakh crore undue gains to the allottees. The report, uploaded by The Times of India (ToI) on its website on Saturday, squarely blames the coal ministry for delay in resorting to competitive bidding even as the law ministry had said, way back in 2006, that it was in favour of such a move.
The draft report was quoted in a news report published by ToI on Thursday as finding “undue benefit” extended to 100 private and public sector companies through allotment of 155 coal blocks between 2004 and 2009. The CAG had dismissed the draft report, and its content, calling it “exceedingly misleading” within hours of the publication. “The details being brought out were observations, which are under discussions at a very preliminary stage and do not even constitute our pre-final draft and hence, are exceedingly misleading,” the CAG had said in a letter to the Prime Minister’s Office (PMO) on Thursday.
The draft report notes the concept of competitive bidding was made public in June 2004. It was decided in a meeting with the PMO in October of the same year that applications received till June 2004 would be considered in accordance with the extant policy (screening committee route), and thereafter allocations would be made on the basis of competitive bidding.
| BLOW-BY-BLOW ACCOUNT |
| June 2004 Ministry of Coal (MoC) asks the Department of Legal Affairs (DLA) if blocks could be allocated through competitive bidding under the CMN Act read with MMDR Act and Mineral Concession Rules, 1960 |
| July 2004 DLA says there is no provision in CMN Act for bidding. Hence, the need for an amendment |
| Aug 2004 MoC again refers it to DLA, which suggests amendment for inserting Section 34 in CMN Act |
| July 2006 MoC refers the matter to DLA once again for amending MMDR Act instead of CMN Act |
| July 2006 DLA agrees. Says govt can introduce bidding by amending existing administrative instructions, which will be governed by the Indian Contract Act, 1872. Says it’s a matter of policy to be decided by the referring ministry |
| Aug 2006 MoC seeks clarification from DLA. The latter says it’s not specified anywhere that bidding can be done only through amendment in CMN Act |
| Aug 2006 Law secretary opines that since allocation is purely administrative in nature, bidding can also be done by administrative arrangements. However, bidding would be placed on a higher legal footing if introduced in the Act, he says |
“However, the coal ministry continued to follow the screening committee route for subsequent allotments till date,” the draft report says. According to the report, a series of correspondence took place between the coal and law ministries in 2006 to decide on whether competitive bidding could be introduced through an Administrative Order or it would require amendments to the Coal Mines Nationalisation (CMN) Act or Mines and Minerals Development and Regulation (MMDR) Act.
“In fact, there was no legal impediment for introduction of transparent and objective process of competitive bidding as per the legal opinion of July 2006 of the ministry of law and justice and this could have been done through an administrative decision. However the ministry of coal went ahead for allocation of blocks through screening committee,” the report notes.
Adding to the mystery, the CAG’s leaked draft report said in June 2004 the coal ministry had pointed out a substantial difference between the price of coal supplied by Coal India Ltd (CIL) and the cost of coal produced through captive blocks. As a result, “there were windfall gains to the allottees, part of which the government wanted to tap through bidding,” it points out.
The report also points out the manner in which dismal production from captive blocks resulted in a shortfall in availability. Out of 86 blocks — with a target production of 73 MT scheduled for the current Plan period — only 28 blocks started production, generating 36.4 MT coal during 2010-11. “A shortfall of 52 per cent in production target reflects that the objective of enhancing production through captive blocks largely remained unachieved,” it says.
Last year, the coal ministry had cancelled 24 allocations for delay in development and is currently issuing show cause notices to 58 companies threatening cancellation of allotments.
