Now, coal burns Rs.186,000-crore hole in exchequer

CAG report points the finger at Manmohan for discrepancies

August 17, 2012 02:58 pm | Updated December 04, 2021 11:10 pm IST - New Delhi

Reeling under the impact of several scams, including 2G spectrum allocation, UPA-II was buffeted on Friday by another serious allegation that it had caused a Rs. 1.86- lakh crore loss to the exchequer by not ensuring transparency in coal blocks allocation during 2004-09.

Prime Minister Manmohan Singh also came under scrutiny of the Comptroller and Auditor-General, whose report pointed to serious discrepancies during 2006-09, when he was holding charge of the Coal Ministry. The role of the PMO was also suspect as it delayed the introduction of competitive bidding, though the Law and Justice Ministry had cleared the process.

Click >here for PDF version of a graphic on coal blocks allocation.

The government will find itself pushed to the wall when Parliament reconvenes on August 21 after a break, as the Opposition is likely to stall the proceedings. One of the biggest beneficiaries of the coal blocks allocation has been the Anil Ambani-owned Reliance Power Limited (RPL). Coming down heavily on the Ministries of Power and Coal for giving post-bid concessions to RPL for its 4000-MW Sasan mega power project, the CAG said this not only vitiated the bidding process but also conferred on the developer Rs. 29, 033 crore in “undue benefits.”

It also criticised the government for allowing RPL to use surplus coal from the blocks allotted to the Sasan plant for its other projects. “Permission for the use of excess coal by RPL from the three blocks — the Moher and Moher-Amlohri extension and Chhatrasal — allocated for the Sasan ultra mega power project (UMPP) after its award not only vitiated the bidding process but also resulted in undue benefit to RPL. To ensure free play, a level playground and transparency in the bidding process for future developers to derive comfort in government action, the allocation of Chhatrasal should be appropriately reviewed,” the CAG said in its report on ‘Ultra Mega Power Projects under Special Purpose Vehicles,’ which was tabled in Parliament on Friday.

The report said three coal blocks were allocated to the Sasan project for its requirements of 16 million tonnes a year. In November 2007, Madhya Pradesh Chief Minister Shivraj Singh Chauhan requested the Prime Minister to allow RPL to use the surplus coal from the captive blocks of the Sasan plant being set up by the company in Chitrangi tehsil. The matter was referred to an Empowered Group of Ministers (EGoM), which discussed the issue on May 28 and August 14, 2008. It recommended that RPL be allowed to use the surplus coal for its other projects from where power was sold through a tariff-based bidding; accordingly, permission was granted. “The decision resulted in a financial benefit of Rs. 29,033 crore with a net present value (NPV) of Rs. 11,852 crore to the project developer.”

It said a reading of all the clauses in the allocation letters together conveyed that they were inserted in the coal allocation letter as a safeguard against misuse of coal by the developer. “The permission to use surplus coal in other projects of the bidder after award of the contract, based on the acceptance of the lowest tariff, vitiated the sanctity of the bidding process, which would result in post-bid concessions to the developer having a significant financial implication.”

The CAG said it was not clear how the Power Ministry concluded in October 2006 that the two blocks allocated initially for the Sasan project (Moher and Moher Amlohri) were inadequate. “The basis on which the Ministry of Coal was prevailed upon in October 2006 itself to allot an additional block [Chhatrasal]… to the Sasan… project by de-allocating it from the public sector NTPC is not clear. Till March 2009, the Ministry of Coal was taking the stand that coal from two blocks was sufficient for Sasan, and there is no justification for allocating a third block to the developer.”

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