Coal news and updates

In what could put the Congress-led government to more embarrassment before UPA-II's term comes to an end, the Comptroller and Auditor General (CAG) is compiling a report on coal blocks allocated to power projects which were initially promised no fuel linkages. 

 

The auditor is of the opinion that the allocations have "vitiated the sanctity of the bidding process since it amounts to post-bid concessions having significant financial implication". At least a dozen-odd such power projects have been allocated coal blocks, which have now come under the scrutiny of the auditor. 

 

These allocations were made to power projects on the basis that they were free to fix higher tariff as they were not given any concessions such as free linkages to coal blocks or free land allocations. 

 

"Since fuel cost is an important aspect of commercial consideration in arriving at the tariff, any relaxation of condition subsequent to bidding would vitiate the bidding process," a senior CAG official said on allocation of coal blocks to Case-1 power projects as they are referred to. The auditor is questioning the government's motive behind such deals as "the bidders who lost out did not have equal opportunity to bid under the relaxed condition". 

 

Case-1 power projects are those where a developer is at a higher risk as he has to arrange for land, fuel linkages and all approvals unlike in Case-2 where the government provides fuel linkages with coal block allocation and arranges for land and all other approvals. Thus, the tariff fixed in Case-1 power projects is always higher than those where mines are allocated to bidders. 

 

Earlier, the CAG had carried out one such audit of Case-1 power project, Sasan Ultra Mega Power Project, which was tabled in Parliament along with the Coalgate report in 2012 where it had observed that diversion of surplus coal from a captive mine to another project of the developer amounted to post-bid concessions. 

 

Already, the UPA is battling charges of illegality in allocation of coal blocks with the Supreme Court monitoring a CBI investigation against captive coal mines allocated by the government since 2005. The government has indicated that it is likely to cancel more than 40 such captive coal mines after the court observed that it didn't see merit in some of these allocations as many applications were rejected without assigning any reason. 

 

In all the Case-1 power projects under scrutiny power tariffs were fixed in open bidding considering they would source own fuel from the open market. 

 

The auditor is studying how free coal did not translate into lower tariff and if the exchequer and the taxpayers had to bear for the cost of concessions made to the bidders.

 

Source: ToI