CoalMin's defence report to PAC by Sept 14

Last Updated: Fri, Sep 07, 2012 19:22 hrs

The coal ministry is readying its defence against the Comptroller and Auditor General of India (CAG)’s observations on thecontroversial allocations, and is likely to place it before the Public Accounts Committee (PAC) of Parliament by September 14.

“The ministry is preparing its comments, paragraph-wise, on the observations made in the CAG report. The report will be submitted to the PAC by 14th of this month,” a senior ministry official told Business Standard. “Our comments will be factual in nature pointed at only the pieces of opinion expressed by CAG,” he said.

The ministry, in its report to the PAC headed by senior Bharatiya Jananta Party leader Murli Manohar Joshi, is likely to counter the allegation of having extended financial gains to companies through at least five arguments. One, calculating the quantum of extractable reserves in blocks based on averages, is not correct. CAG had computed financial gains to companies as being the difference between the average sale price and the production cost incurred by Coal India Ltd (CIL) of the estimated reserves in the allocated blocks.

Two, the cost of coal production varies significantly from one mine to another even for CIL due to varying geo-mining conditions, method of extraction, surface features, number of settlements and availability of infrastructure. Three, while CIL has been generally mining coal in areas with better infrastructure and more favorable mining conditions, most of the blocks offered for captive mining are located in difficult geologies.

Four, even if some financial gain has been extended, a part of it would be covered by the government through taxation. The Mines and Minerals Development and Regulation (MMDR) Bill, when it becomes an Act, will allow the government to seek more than a fourth of the miners’ profits. Finally, the ministry would argue that because the blocks were allocated to private entities only for captive purposes for specified end-uses, it is not appropriate to link the blocks to the price of coal set by CIL.

However, the coal ministry, headed by Congress Member of Parliament (MP) Sriprakash Jaiswal, may find it difficult to explain the eight-year long delay in resorting to competitive bidding as a method of allocating blocks. A part of the financial gains extended to companies could have accrued to the national exchequer by introducing bidding earlier, the CAG had noted. The government has been arguing that the delay occurred owing to opposition to bidding by at least five Bharatiya Janata Party (BJP)-ruled state governments and because of the conflicting opinions on the matter by the law ministry.

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