The Coal Ministry has contested before the PAC the CAG calculation that coal block allocation led to financial gains to the tune of Rs 1,85,591 crore to private players, saying that it is flawed on “basic fundamentals” related to the geological sector.
It also said the “basic intent” of the government behind “such allocation” of coal blocks was to induce rapid development of infrastructure by involving the private sector to invest in identified priority sectors.
Taking into account the average sale price of all grades of coal of Coal India Ltd (CIL) in opencast mines as well as average cost price of all grades of coal in the PSU and adding additional financial costs, the CAG has calculated financial gain of Rs 185,591.34 crore to private parties.
The auditor is of the view that a part of this financial gain could have been tapped by the government by taking timely decision on competitive bidding for allocation of coal blocks.
In its response to the CAG report, the Coal Ministry has told Parliament's Public Accounts Committee (PAC) that transparent procedures were observed while recommending allocations by following a “broad policy framework”.
“It is to be stated that the calculation of the said financial gains were flawed on certain basic fundamentals related to the geological sector,” the Ministry has told the PAC in a written submission.
The financial gains to private parties have been computed on the basis of the difference between the average sale price and the production cost of the CIL, as well as estimated extractable reserves of the allocated coal blocks, the ministry said.
“This computation of extractable reserves based on averages would not be correct in the geological sector. Moreover, as the coal blocks were allocated to private companies only for captive purposes for specific end-uses, it would not be appropriate to link the allocated blocks to the market price of coal,” the ministry said.