In a rare rebuttal, the Comptroller and Auditor General of India (CAG) on Thursday described a newspaper report that it had indicated the government lost Rs. 10.7 lakh crore by not auctioning coal blocks as “exceedingly misleading.” It virtually ruled out any loss to the exchequer.

The “scam” raised a storm in both Houses of Parliament. The uproar created by the Opposition during question hour demanding a transparent inquiry forced the adjournment of the Lok Sabha and the Rajya Sabha.

Later, in a letter to Prime Minister Manmohan Singh, the CAG said the details brought out in the daily were observations which were under discussion at a very preliminary stage. They did not even constitute its pre-final draft and were, therefore, exceedingly misleading.

“Pursuant to [a] clarification provided by the Coal Ministry in exit conferences held on February 9 and March 9, we have changed our thinking… In fact, it is not even our case that the unintended benefit to the allocatee is an equivalent loss to the exchequer. The leak of the initial draft causes great embarrassment as the Audit Report is still under preparation. Such leakage causes very deep anguish,” excerpts of the letter released by the PMO said.

The leaked report quoted the CAG as having estimated a windfall gain of Rs. 6.31 lakh crore (Rs. 3.37 lakh crore to PSUs and Rs. 2.94 lakh crore to the private sector) based on the prices prevailing during the year of allocation on a constant cost and price basis and as on March 31, 2011.

The amount at current prices was Rs. 10.67 lakh crore (PSUs Rs. 5.88 lakh crore and private sector Rs. 4.79 lakh crore).

Interestingly, the Coal Ministry said in June 2004 that there was a substantial difference between the price of coal supplied by Coal India Ltd (CIL) and the cost of coal produced through coal blocks allocated for captive mining. As such, there were windfall gains to the allottees, part of which the government wanted to tap through competitive bidding.

Officials in the Coal Ministry said that the exit conferences held by CAG had led to clarification on a number of issues pertaining to windfall gains. That had led to changes in many of its observations, including the one pertaining to loss to the exchequer.

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