Report on coal block allocation misleading: CAG

An initial audit report estimating Rs 10.67 lakh crore loss to the exchequer on account of allotment of coal blocks during 2004 to 2009 without auction caused an uproar in the Parliament and was described as "exceedingly misleading" by the CAG himself.

As media carried reports of the draft CAG report, the Comptroller and Auditor General wrote a letter to the Prime Minister Manmohan Singh this afternoon, excerpts of which were released by the PMO.

"In the extant case the details being brought out were observations which are under discussion at a very preliminary stage and do not even constitute our pre-final draft and hence are exceedingly misleading," the CAG said in the letter.

The official auditor said that "pursuant to clarification provided by the Ministry (of Coal) in exit conferences held on

February 9, 2012 and March 3, 2012, we have changed our thinking". "In fact it is not even our case that the unintended benefit to the allocatte 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," the CAG letter was quoted as saying by the PMO release.

In the leaked report on allotment of coal blocks, CAG had estimated a "windfall gain" of Rs 6.31 lakh crore (PSUs – Rs 3.37 lakh crore and private parties - Rs 2.94 lakh crore) based on the prices prevailing during the year of allocation on constant cost and price basis and as on March 31, 2011.

The amount at current prices would now work out to Rs 10.67 lakh crore (PSUs - Rs 5.88 lakh crore and private parties - Rs 4.79 lakh crore), the CAG said in the draft report.

In its reply, 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 and as such there was windfall gains to the allocattees, part of which the government wanted to tap through competitive bidding.

"The windfall gains to the allocattees were expected to be substantial," it had stated. The CAG report comes more than a year after its report on the allocation of scarce 2G telecom spectrum on first-come-first-service basis in which it had estimated a presumptive loss of Rs 1.76 lakh crore to the exchequer.

"There was an element of subjectivity, opaqueness and lack of transparency which allowed windfall gains to the allocattees," CAG said.