Dubbing CAG's computation of loss of Rs. 1.86 lakh crore in coal block allocation as "flawed" and "misleading", Prime Minister Manmohan Singh on Monday took thebattle to the Opposition camp, blaming it for thwarting the Centre's effort to shift to competitive bidding. Making a
statement in both Houses of Parliament amid uproar created by BJP members, Singh refused to be on the back foot, declaring that he takes "full responsibility" for the decisions taken as he contended that CAG's "observations" are "clearly disputable".With BJP creating disruptions, he read out a few portions of his four-page statement before laying it in Lok Sabha and Rajya Sabha which were repeatedly adjourned because of uproar.
Conscious that the CAG reports are normally discussed in detail in the Public Accounts Committee of Parliament where the ministry concerned responds, Singh said he was departing from this established procedure "because of the nature of the allegations that are being made and because I was holding the charge of coal minister for a part of the time covered by the report."
Responding point-by-point to the CAG's observations, the Prime Minister said even if the government auditor's contention that benefits accrued to private companies were accepted, "their computations can be questioned on a number of technical points."
He asserted that aggregating the "purported gains" to private parties "merely on the basis of the average production costs and sale price of CIL (Coal India Limited) could be highly misleading."
As coal blocks were allocated to private companies only for captive purposes for specified end-uses, he said, it would not be appropriate to link the allocated blocks to the price of coal set by CIL.
The Prime Minister, whose resignation is being sought by the BJP, asserted that "any allegation of impropriety is without any basis and unsupported by facts".
Seeking to corner the Opposition over the issue, he said the policy of allocating coal blocks without competitive bidding existed since 1993 and previous governments also allocated "precisely in the manner that the CAG has criticised".
He also said major coal and ignite bearing states like West Bengal, Chhattisgarh, Jharkhand, Orissa and Rajasthan "ruled by Opposition parties" were "strongly opposed" to a switch over to competitive bidding process.
On the charge of delay in bringing the Coal Mines Nationalisation (Amendment) Bill, 2000 to facilitate commercial mining by private companies, Singh said it was
pending in Parliament for a long time owing to "stiff opposition from the stakeholders" and government wanted broader consultations and consensus.
Singh said these state governments felt that a switch over would increase the cost of coal, adversely impact value addition and development of industries in their areas and dilute their prerogative in the selection of leases.
Citing instances, he said the then BJP chief minister of Rajasthan Vasundhara Raje had written to him in April 2005 opposing competitive bidding.
The Prime Minister quoted Raje as saying then that the competitive bidding was against the spirit of the Sarkaria Commission recommendations.
Singh also named another BJP chief minister Raman Singh (Chhattisgarh) saying that the latter had written to him in June 2005 seeking continuation of the extant policy of coal block allocation.
He said the Chhattisgarh chief minister had requested that any change in coal policy be made after arriving at a consensus between the central government and the states.
"The state governments of West Bengal (Left) and Orissa (BJD-led) also wrote formally opposing a change to the system of competitive bidding," Singh said.
The Prime Minister termed as "flawed" the premise of the CAG that the competitive bidding could have been introduced in 2006 by amending the existing administrative instructions and said it is "based on a selective reading" of opinions given by the Department of Legal Affairs.
Claiming that initially, the government had initiated a proposal to introduce competitive bidding by formulating appropriate rules, he said representatives of coal and ignite bearing states voiced their opposition to the proposed switch over in a meeting convened by the PMO on July 25, 2005.
Referring to that meeting, Singh said, "...it was further noted that legislative changes that would be required for the proposed change would require considerable time and the process of allocation of coal blocks for captive mining could not be kept in abeyance for so long given the pressing demand for coal."
The Prime Minister said it was, therefore, decided in the meeting to "continue with the allocation of coal blocks through the extant Screening Committee procedure till the new competitive bidding procedure became operational.
"This was a collective decision of the Centre and the state governments concerned," Singh said.
The Prime Minister noted that the issue was "contentious" and the proposed change to competitive bidding required consensus building among various stakeholders with divergent views, which is inherent in the legislative process.
Singh said the Ministry of Power felt that the auctioning of coal could lead to enhanced cost of production energy.
"In any case, in a democracy, it is difficult to accept the notion that a decision of government to seek legislative amendment to implement a change in policy should come for adverse audit scrutiny...The CAG report has criticised the government for not implementing this decision speedily enough ....But given the complexities of the process of consensus building in our Parliamentary system, this is easier said than done," he said.
Questioning CAG's computation of losses, the Prime Minister said coal blocks offered for captive mining are generally located in areas with more difficult geological conditions than those of the Coal India Limited.
"According to the assumptions and computations made by the CAG, there is a financial loss of about Rs. 1.86 lakh crore to private parties. The observations of the CAG are clearly disputable," Singh said.
He noted that the CAG has computed financial gains to private parties as being the difference between average sale price and the production cost of CIL of the estimated extractable reserves of the allocated coal blocks.
"Firstly, computation of extractable reserves based on averages would not be correct. Secondly, cost of production of coal varies from mine to mine even for CIL... Thirdly CIL has been generally mining coal in areas with better infrastructure and more favourable mining conditions, whereas the coal blocks offered for captive mining are generally located in areas with more difficult geological conditions," he said.
Singh also said that a part of the gains would in any case get appropriated by the government through taxation as Mines and Minerals (Development and Regulation) Bill, presently being considered by Parliament and 26 per cent of the profits earned on coal mining operations would have to be made available for local area development.
"Therefore, aggregating the purported financial gains to private parties merely on the basis of average production costs and sale prices of CIL could be highly misleading.
Moreover, as the coal blocks were allocated to private companies only for captive purposes for specified end-users, it would not be appropriate to link the allocated blocks to the price of coal set by CIL," he said.
Singh also said that from 1993, successive governments continued with the policy of allocation of coal blocks for captive use and did not treat such allocations as a revenue generating activity.
Singh said the "idea of action was conceived for the first time by UPA government" in the wake of increasing demand for captive mines and action was initiated to examine the idea in all its dimensions.
"While the process of making legislative changes was in progress, the only alternative before the government was to continue with the current system of allocations through the Screening Committee mechanism till the new system of auction-based competitive bidding could be put in place.
"Stopping the process of allocation would only have delayed the much-needed expansion in supply of coal ... postponement of coal blocks until the new system was in place would have meant lower energy production, lower GDP growth and also lower revenue," he said adding it was "unfortunate" that the CAG did not take these aspects into accounts.
Singh also said the government has initiated action to cancel the allocations of allottees who did not take adequate follow-up action to commence production.
The Prime Minister also warned "due action against wrong doers" on the basis of the on-going CBI investigations into the allegations of malpractices.
He said it has always been the intention of the government to augment coal production by making available coal blocks for captive mining through transparent processes and guidelines, which fully took into account the legitimate concerns of all stakeholders, including the state governments.
Read: PM's 32-point statement
"The implicit suggestion of CAG that Government should have circumvented legislative process through administrative instructions, over the registered objections of several state governments including those ruled by Opposition parties, if implemented, would have been undemocratic and contrary to the spirit of the functioning of our federal polity," he said.
Maintaining that "CAG's findings are flawed on multiple counts", Singh said now that report is before the House, "appropriate action on the recommendation and observations contained in the report will follow through established Parliamentary procedures".
PM making excuses: BJP
The Bharatiya Janata Party (BJP), however, said on Monday that Prime Minister Manmohan Singh was making excuses to hide facts on the allocation of coal blocks.
"Country is upset with prime minister's statement. He is making excuses and is hiding the facts," BJP leader Prakash Javadekar told reporters after Manmohan Singh's statement in parliament on the issue that has seen adjournments of both houses during last week.
In the entire statement, Javadekar said, the only correct point is that the prime minister takes full responsibility for the decisions of the coal ministry.
"All the files related to coal allocation had his stamp as the coal minister and that is why we want him to resign," he added.
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