M A I N   N E W S

Coalgate: Screening panel failed to do justice to job, says CAG
Aditi Tandon/TNS

New Delhi, August 18
The government auditor’s estimate of gain of Rs 1.86 lakh crore to private firms on the basis of direct allocation of captive coal blocks to them is primarily based on one premise — the screening committee tasked with awarding allocations did not do its job properly.

Accordingly, gains were made by the favoured ones. These could have been prevented had the government introduced competitive bidding for auctioning of blocks, which are a natural resource.

The Comptroller and Auditor General (CAG) looked at 142 blocks directly allocated to state run and private firms between 2004 and 2009 and basically estimated the gains made by private firms which got 57 of these blocks. All the blocks were allocated by the government-established screening committee which was headed by Coal Secretary and represented by states through Chief Secretaries and by officers of all end-user ministries.

A test check of the allocation of two blocks by this committee was done by CAG with respect to the Fatehpur and Rampia coal blocks.

The findings in case of the Rampia coal block were that 108 applications were received against the advertisement that the committee gave in newspapers for allocation. Out of these blocks, only two applicants were shortlisted for making presentations before the committee.

The committee, however, recommended six companies: Sterlite Energy, GMR Energy, Lanco Group, Navbharat Power, Mittal Steel India and Reliance Energy for allocation of Rampia and Dip side of Rampia coal blocks even though it had only called two parties for presentation.

The CAG report, in case of the Fatehpur coal block, said 69 applications came but only 36 were called for a presentation. Finally, the block was given to SKS Ispat and Power and Prakash Industries.

The CAG referred to the minutes of the meeting of the screening committee which recommended the allocation of blocks to certain parties against the others. It noted, “There was nothing on record in these minutes or in any other document on a comparative evaluation of the applicants for a coal block which was relied upon by the committee. “The minutes did not indicate how each one of the applicants for a particular coal block was evaluated. Thus, a transparent method for allocation of coal blocks was not followed by the screening committee.”

imperfect competition

• The CAG looked at 142 blocks directly allocated to state-run and private firms between 2004 and 2009 and estimated the gains made by private firms which got 57 of these blocks
• All the blocks were allocated by the government-established screening committee which was headed by Coal Secretary and represented by states through Chief Secretaries and by officers of all end-user ministries
• A test check of the allocation of two blocks by this committee was done by the CAG with respect to the Fatehpur and Rampia coal blocks. The auditor came to conclusion that a transparent method for allocation of coal blocks was not followed by the screening committee

CAG estimates on power projects based on costing
Girja Shankar Kaura/TNS

New Delhi, August 18
Comptroller and Auditor General report on the three ultra mega power projects (UMPPs) is clearly based on the profits that the projects would accrue to power companies as a result of the favours meted out to them.

CAG, while questioning the eligibility of the Anil Ambani-led Reliance Power to bid for any of the three ultra mega power projects (UMPPs), said the company would enjoy undue benefits of Rs 29,033 crore over 20 years by using surplus coal at another plant. "Audit has estimated the financial benefit that will accrue to the project developer on the basis of comparison of tariff of Sasan project with that of Chitrangi (the third coal block).

Auditor has praise for PPP mode
Vibha Sharma/TNS

New Delhi, August 18
Amid criticism and allegations of “undue benefits and gains” for private partners, there was also a word of appreciation from the country’s top auditor on the much- debated Public Private Partnership (PPP) mode of infrastructure development.

Significantly, the CAG report on Implementation of PPP at the Delhi’s Indira Gandhi International Airport also happens to be the first major audit of the financial model that has come under severe criticism from many for not being financially transparent and posing potential risk to public services. But the report, which found fault with almost every decision taken by the government - right from allocations of prime land for a song to approval for levy of development fee outside the contract to grant of monopolistic “Right to First Refusal” to the GMR infrastructure-led Delhi International Airport Limited (DIAL) - also has a word of appreciation for PPP mode used for modernisation of Brownfield IGI airport.

The CAG termed PPP “an appropriate way for airport development and modernisation”. “From the point of view of development of infrastructure, the Indira Gandhi International Airport can be considered a success. The airport had been adjudged the world’s second best in the 25-40 million passengers’ category per annum,” it added.

So while the PPP policy was right, it is the way it was implemented that led CAG to smell favouritism and undue benefits for private players in the deal.

For example, the levy of DF at the cost of passengers led to “undue benefit of over Rs 3,415.35 crore”.