The national auditor has rattled India Inc and the government with scathing reports naming top business houses such as the Tatas and Jindals and the Anil Ambani Group among alleged recipients of state generosity, including free coal mines, that resulted in benefits that could add up to a mind-boggling . 3.8 lakh crore.

The government, nervous about the fact that some blocks were given away when Prime Minister Manmohan Singh held the coal portfolio, responded aggressively and sought to rubbish the calculations of the Comptrollerand Auditor General (CAG). BJP demanded Singh's resignation saying he was morally responsible for the alleged scams, the magnitude of which was almost double the supposed loss to the exchequeras aresult of the telecom scam.
CAG said the government's move to allocate coal blocks free to the Tatas, Jindals, Essar, and many other companies resulted in gains of an estimated . 1.86 lakh crore, based on the price of the entire quantity of coal that can be mined from these blocks over their lifetime. It said the blocks could have been auctioned six years ago, and the delay has caused a loss to the exchequer.
In a separate report, the auditor said Reliance Power would gain an estimated . 29,000 crore over two decades by diverting surplus coal from its Sasan ultra mega power project to another plant that would sell electricity at higher rates. CAG said to be eligible to bid for UMPPs, a company should have implemented projects worth . 3,000 crore in the last 10 years, including one project of more than . 500 crore. However, it estimated that out of investments of . 4,416 crore claimed by Reliance Power while bidding for the Sasan project, only. 1,292 crore was "admissible experience" while the rest "may not conform to the stipulated qualifying requirements".
Reliance Power vehemently denied any wrongdoingat the Sasan project it won after a competitive bid, but the company's shares lost 5.6%. Shares of companies that were named as recipients of coal blocks also fell. Tata Power lost 3.7%, Adani Power fell 3.3% while JSPL shed 4% of its market value. A third report, which analysed the privatisation of the Delhi airport, said the process was "more skewed in the favour of the concessionaire".
CAG came to this conclusion on the ground that land was made available for commercial development without charging market rates. "With an equity contribution of . 2,450 crore, of which the private consortium's share was . 1,813 crore, DIAL has got a brownfield airport for 60 years, and in addition, commercial rights of land valued at . 24,000 crore with a potential earning capacity, according to its own estimates, of . 1,63,557 crore." Rebutting the auditor's findings, DIAL in a late evening communiqué said: "The entire commercial land available with DIAL neither has any immediate commercial value nor can be put to use and, therefore, cannot be monetised immediately."
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Thus, just using value of one acre and extrapolating the same for the entire land parcel is at best an arithmetic exercise and not practical," DIAL added. Questioning CAG's methodology, the statement argued: "In fact, using the same method of calculation, AAI will receive Rs. 3-4 lakh crore from DIAL as revenue share over the 54 years." The GMR statement also pointed out that the concession of 60 years was part of the bidding documents. "It created a level playing field with no preference to any single bidder and was factored in by all the bidders," a GMR spokesperson said.
Responding to CAG's observation of gains to companies allotted captive coal blocks, Coal Minister Sriprakash Jaiswal said the national auditor had erroneously calculated the number on the basis on an average price, ignoring sharp variations in various blocks. "How can they arrive at a figure when each mine is different. It is wrong to arrive at a figure on the basis of some average," he told reporters.
He said blocks had to be given to private firms because Coal India's output was lagging demand, and that state governments, including those ruled by BJP and the Left, had initially opposed competitive bidding and favoured allocation. However, the government would punish the guilty if there was any wrongdoing. "Irregularities will be investigated and the guilty will be punished, whosoever it may be."
But the national auditor stuck to its guns, saying its Rs 1.86-lakh-crore loss estimate in allocation of coal blocks is a "conservative" figure, which accounts for only 57 'open cast' coal blocks allocated to private firms. CAG has excluded underground mines because they are not financially lucrative, it said. The report also excluded the financial benefits to government companies, deputy CAG AK Patnaik told reporters.
"After the exit conference with the government we excluded financial benefits to government companies because it would anyway come back in the form of dividend," added CAG Director-General Revathy Iyer.
Analysts agreed with the coal minister. "CAG's calculation of gain from coal blocks is flawed. Their calculation is based on the geological reserve and current price of coal. Valuation of an operational mine cannot be compared to that of an unexplored mine, where the risks are high due to uncertainty of reserve and number of hurdles in mine development," Debasish Mishra, senior director at Deloitte Touche Tohmatsu India.
Reliance Power CEO JP Chalasani said CAG had not fully considered the company's views that there was no undue benefit. "We have neither received the basis for the numbers used to calculate undue benefit, nor have our representations been fully considered. He also said it was wrong to compare tariffs of the Sasan project with the tariffs of the Chitrangi project, which would use surplus coal from Sasan.
Comparison between Sasan and Chitrangi tariff to quantify benefits is extremely misleading. No two projects can ever have the same tariff even if the coal sources are the same, and even if the project is coming in the same location as an expansion. For instance, tariffs from NTPC plants in close proximity and sourcing coal from the same mines are vastly different."
Naveen Jindal, Congress MP and CMD of Jindal Steel & Power (JSPL), flayed CAG, saying its viewpoint is not in the interest of the country. JSPL is among the companies listed as beneficiaries of coal block allocation.
Power producers said private sector participation in coal mining was essential.