27 Jul 2016 11:50 IST

CAG sees ₹380-cr ‘value loss’ in coal auction

Ministry contests audit finding

The e-auction of 15 coal mines in two tranches last year was marked by under-valuation, without which the government could have earned at least ₹381.93 crore more, or around 41 per cent of the upfront amount of ₹932.44 crore, the top government auditor has observed.

In its report on ‘e-auction of Coal Mines’ tabled in the Lok Sabha on Tuesday, the Comptroller and Auditor General (CAG) pointed out that mines won by the likes of Jaiprakash Power Ventures, JSW Steel, GMR Energy and Hindalco Industries were undervalued by the government.

Of the 15 mines auctioned, the floor price for six mines in the non-regulated sector was under-valued by as much as ₹1,264.44 per tonne; additionally, the floor price of nine mines of the power sector was under-valued by as much as ₹142.57 per tonne, it said.

CAG Director-General Mala Sinha said, “Inconsistencies and inaccuracies in following some of the assumptions and errors in computation of the intrinsic value of the mine (were) found, which had an effect on the upfront payment and floor prices. The calculation of the floor prices was controllable by the government and errors in the calculation should not have (been) left to be corrected in the bidding process.”

The government, however, contested the auditor’s observation. A senior Coal Ministry official said that “when resources are being auctioned, the value is determined by market forces; therefore, there cannot be a case of under-valuation.” The revenue that will accrue to the States from the e-auction is higher than what the previous CAG had determined as revenue loss, the official added.

About the Moitra mine, which went to JSW Steel, whose winning bid was lower than the CAG-determined floor price, the official said, “The CAG has taken the prices of washed coking coal rather than the notified price, which was not decided by the government.” The audit should have focussed on the implementation of the government decision, the official added.

New mechanism hailed

The CAG found several “systemic and procedural” issues with the e-auction process, but was largely pleased at the new mechanism –– which, it said, was “an improvement” over the prevailing mechanism. “We appreciate the implementation of the auctions by the Ministry of Coal,” said H Pradeep Rao, Deputy CAG.

Some of the issues raised by the audit were corrected by the time the third tranche of auctions took place. For example, the CAG found that in the first two tranches, several bidders were from the same group company. This was barred in the third tranche.

The CAG recommended that guidelines be framed for evaluating the final bid price to enhance transparency.

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