Audit findings pointed out by CAG in it's report - Allocation of coal blocks and Augumentation of coal production
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Working of CAG for arriving at the loss of INR 1.86 lakh crores to the exchequer due to alleged irregularities in allocation of coal blocks for captive mining:
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6282.5 million tons of extractable reserves of open cast mines (CIL OC mines) allotted to private parties
multiplied with
Gain per ton of INR 295.41 which is arrived as difference of 'Average sale price of all grades of CIL OC mines for 2010-11: INR 1028.42 ' and 'Average cost price of all grades of CIL OC mines for 2010-11: INR 733.01' (cost price includes Financing cost of INR 150 per ton)
Exclusions taken in to consideration by CAG are:
The financial impact of "non-transparent allocation" has been confined to Open Cast mines allotted to private allottees only (Even in the allotments to private parties, Underground mines and Underground reserves of mixed mines are excluded in arriving at the loss)
Also, allocations to Joint Ventures of PSU and Private parties excluded
Ministry's response on this issue
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. Coal produced from the captive blocks was not available for commercial sale
. 17 Blocks were allotted to power sector where tariff is regulated on the basis of input costs and transfer price of coal is assessed on actual cost basis
. In case of cement and steel sector, though prices of end products are not regulated but a competitive market ensures the best benefit for the consumers
. There would not be any gain to the allottees as CIL was not in a position to supply additional coal to the allottees.
. Allocation through screening committee was in vogue for 15 years and was not looked as potential source of revenue for Central Government but with intent to induce rapid development of infrastructure.
It is a Performance audit and INR 1.86 lakh crores loss to the exchequer is only a part of the report. All the audit findings in the report are summarized below:
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> Drilling capacity of Central Mine Planning and Design Limited (CMPDIL) was only 3.44 lakh metres as against recommedation of atleast 15 lakh metre per annum.
(The more the CMPDIL drills, the better are the chances of discovering coal reserves)
> CIL not met the targets set out for XI plan period for increasing the rate of coal production.
reasons observed are:
.inadequate drilling capabilities
.backlog in OverBurden (the top layer which has to be removed for accessing pure mineral) removal
.low availability and under utilisation of Heavy Earth Moving Machinery
.Coal Ministry's move to increase production by de-reserving coal blocks from Coal India Limited (CIL) and allocating them to captive consumers did not yield desired results as no production could commence from these blocks
> No monitoring of end use of coal distributed to small and medium consumers by CIL
> Coal Ministry failed to maintain reasonable distance between blocks offerred to private sector after de-reserving and existing mines and projects of CIL, thereby causing operational problems and resulting in under extraction of mine by CIL.
> Under performance of 3 Subsidiaries (Opencast Units) of CIL resulting in shortfall of production by 37.84 Million Tonnes
> No growth in production from underground mines
> No Transparency in method for allocation of coal blocks to private sector (Captive Mining) by the Screening Committee.
> Production of coal from captive mining was not encouraging.
> Delay in notifying rules for 'auctions by competitive bidding of coal mines'. The idea of competitive bidding was conceptulized in July 2006, the rules were notified only in February 2012.
> GOI is yet to finaliase the procedures for competitve bidding
> "Delay in introductin of the process of competitive bidding has rendered the existing process beneficial to private companies. Audit has estimated financial gains to the tune of INR 1.86 Lakh crore LIKELY TO ACCCRUE TO private coal block allottees (based on average cost of production and average sale price of Opencast mines of CIL in year 2010-11)"
"Therefore audit is of strong opinion that there is a need for strict regulatory and monitoring mechanism to ensure that benefit of cheaper coal is passed on to the consumers"
> Abnormal time taken for obtaining various approvals like mining leases, surface rights and land acquisition, resettlement & rehabilitation issues, environmental clearances from central and state governments
> Poor review mechanism to ascertain actual production/progress in realtion with the production/progress reported by the allottees.
> Delay in encashing Bank Gaurentees for not producing coal within time limit by the allottees. Lapsed Bank Gaurentees amounting to Rs. 311 crores which needed to be renewed.
=======================================================================
Working of CAG for arriving at the loss of INR 1.86 lakh crores to the exchequer due to alleged irregularities in allocation of coal blocks for captive mining:
---------------------------------------------------------------------------------------------------------------
6282.5 million tons of extractable reserves of open cast mines (CIL OC mines) allotted to private parties
multiplied with
Gain per ton of INR 295.41 which is arrived as difference of 'Average sale price of all grades of CIL OC mines for 2010-11: INR 1028.42 ' and 'Average cost price of all grades of CIL OC mines for 2010-11: INR 733.01' (cost price includes Financing cost of INR 150 per ton)
Exclusions taken in to consideration by CAG are:
The financial impact of "non-transparent allocation" has been confined to Open Cast mines allotted to private allottees only (Even in the allotments to private parties, Underground mines and Underground reserves of mixed mines are excluded in arriving at the loss)
Also, allocations to Joint Ventures of PSU and Private parties excluded
Ministry's response on this issue
---------------------------------------
. Coal produced from the captive blocks was not available for commercial sale
. 17 Blocks were allotted to power sector where tariff is regulated on the basis of input costs and transfer price of coal is assessed on actual cost basis
. In case of cement and steel sector, though prices of end products are not regulated but a competitive market ensures the best benefit for the consumers
. There would not be any gain to the allottees as CIL was not in a position to supply additional coal to the allottees.
. Allocation through screening committee was in vogue for 15 years and was not looked as potential source of revenue for Central Government but with intent to induce rapid development of infrastructure.
It is a Performance audit and INR 1.86 lakh crores loss to the exchequer is only a part of the report. All the audit findings in the report are summarized below:
-----------------------------------------------------------------------------------------------------------------------
> Drilling capacity of Central Mine Planning and Design Limited (CMPDIL) was only 3.44 lakh metres as against recommedation of atleast 15 lakh metre per annum.
(The more the CMPDIL drills, the better are the chances of discovering coal reserves)
> CIL not met the targets set out for XI plan period for increasing the rate of coal production.
reasons observed are:
.inadequate drilling capabilities
.backlog in OverBurden (the top layer which has to be removed for accessing pure mineral) removal
.low availability and under utilisation of Heavy Earth Moving Machinery
.Coal Ministry's move to increase production by de-reserving coal blocks from Coal India Limited (CIL) and allocating them to captive consumers did not yield desired results as no production could commence from these blocks
> No monitoring of end use of coal distributed to small and medium consumers by CIL
> Coal Ministry failed to maintain reasonable distance between blocks offerred to private sector after de-reserving and existing mines and projects of CIL, thereby causing operational problems and resulting in under extraction of mine by CIL.
> Under performance of 3 Subsidiaries (Opencast Units) of CIL resulting in shortfall of production by 37.84 Million Tonnes
> No growth in production from underground mines
> No Transparency in method for allocation of coal blocks to private sector (Captive Mining) by the Screening Committee.
> Production of coal from captive mining was not encouraging.
> Delay in notifying rules for 'auctions by competitive bidding of coal mines'. The idea of competitive bidding was conceptulized in July 2006, the rules were notified only in February 2012.
> GOI is yet to finaliase the procedures for competitve bidding
> "Delay in introductin of the process of competitive bidding has rendered the existing process beneficial to private companies. Audit has estimated financial gains to the tune of INR 1.86 Lakh crore LIKELY TO ACCCRUE TO private coal block allottees (based on average cost of production and average sale price of Opencast mines of CIL in year 2010-11)"
"Therefore audit is of strong opinion that there is a need for strict regulatory and monitoring mechanism to ensure that benefit of cheaper coal is passed on to the consumers"
> Abnormal time taken for obtaining various approvals like mining leases, surface rights and land acquisition, resettlement & rehabilitation issues, environmental clearances from central and state governments
> Poor review mechanism to ascertain actual production/progress in realtion with the production/progress reported by the allottees.
> Delay in encashing Bank Gaurentees for not producing coal within time limit by the allottees. Lapsed Bank Gaurentees amounting to Rs. 311 crores which needed to be renewed.
