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Economy Aug 17, 2012

CoalGate replaces 2G as the mother of all revenue-loss scams

By Firstbiz Staff

The controversial Comptroller and Auditor General reports on coal, power and Delhi airport have finally been tabled in the Parliament.

The financial benefit to private companies that resulted from from non-transparent allocation of coal blocks has been revised to Rs 1.86 lakh crore from Rs 10.67 lakh crore earlier. This is largely because CAG has excluded public companies from the report.

CAG said it has arrived at the estimates based on the average cost of production and average sale price of opencast mines of Coal India in the year 2010-11.

It names 25 companies including Essar Power, Hindalco, Tata Steel, Tata Power and Jindal Steel and Power which have got the blocks in various states.

"A part of this financial gain could have accrued to the national exchequer by operationalising the decision taken years earlier to introduce competitive bidding for allocation of coal blocks" the CAG report said, adding that there is a strong need for strict regulatory and monitoring mechanism to ensure that benefit of cheaper coal is passed on to the consumer.

Reuters

This is an unforgiving indictment for the government on delaying the introduction of the process of competitive bidding. But more importantly it is a huge embarrassment for the UPA because Prime Minister Manmohan Singh held the coal ministry between 2006 and 2009. Screening committee on coal blocks, which was headed by the Prime Minister in 2006-2009 has been severely indicted by CAG.

The auditor's report says that 57 coal fields were allocated - instead of being auctioned - to 100 private companies. The report says the allotment of blocks was opaque, "subjective" and allowed the companies to benefit to the tune of nearly Rs 1.85 lakh crore.

The auditor has also given three strict recommendations for the coal ministry.

First, CAG has suggested the setting up of a high-powered group along the lines of FIPB as a single-window mechanism to grant necessary clearances such as mining lease, forest clearance, land acquisition etc for accelerating procedures for commencement of production.

Second, the CAG report recommends that the ministry of coal should work out modalities to implement the procedure of allocation of coal blocks for captive mining through competitive bidding.

And last, that the ministry should evolve a system of giving incentives to encourage production performance and disincetivise poor performance.

Meanwhile, the CAG report on Power accuses the government of favouritism and benefiting companies like Tata and Reliance Power. CAG says the bidding process was vitiated by allowing Reliance Power to use excess coal from three blocks allocated to Sasan project.

CAG has also slammed the levy of development fee on passengers at Delhi Airport, saying it vitiated sanctity of bidding process. CAG added that DIAL will get undue benefit of Rs 3,415.25 cr from levy of development fee on passengers at Delhi Airport.

by Firstbiz Staff

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