CAG's coal report: 10 big facts on this big controversy

New Delhi:  The government is now under fire on account of a report by its auditor that says it lost 10.7 lakh crores because it undervalued coal deposits and did not auction coal fields between 2004 and 2009. Here is your 10-point cheat sheet to this story:
1) The losses are part of a draft report by the government's auditor, the Comptroller and Auditor General, which was leaked to the media.

2) The draft report says 155 coal-fields were allocated to about 100 private and some state-run firms or public sector units in a manner that gave "undue benefits" to the companies. The report said the sale of the blocks was "subjective" and allowed "windfall gains", but does not make allegations of corruption or bribe-taking.

3) This afternoon, the CAG wrote to the Prime Minister's Office and said it was embarrassed by the leak. "The observations which are under discussion at a very preliminary stage ..and hence are exceedingly misleading," the letter allegedly states.

4) The Opposition attacks in Parliament, says the Prime Minister, who supervised the Coal Ministry for some of the period in question, must explain.

5) Coal Minister Sriprakash Jaiswal says ads were placed to invite offers from interested firms, and that BJP state governments, like in Rajasthan, had opposed a process of bidding.

6) India is the world's third-largest coal producer in the world after China and the United States.

7) Analysts and experts say that  an auction would raise power tariffs and that not all coal blocks are profitable or commercially viable. They say CAG has erred in its calculation of losses.

8) State-run power company NTPC says it made no windfall profits from the allocations and that the lower costs meant cheaper electricity for consumers.

9) The Indian subsidiary of ArcelorMittal, and steel makers Tata and Jindal Steel and Power, are among the companies named in the report. Jindal's controlling shareholder, Naveen Jindal, who is also a member of parliament, defended the policy of direct allocations, saying it had allowed private companies to jump-start production at mines left idle by state-run Coal India Limited, the world's single largest producer.

10) Coal fields are currently allocated by a screening committee.  Interested firms are given points for different parameters- whether land and environmental clearances are in place, for example. Parliament last year approved amendment to Mines and Minerals Regulation and Development Act of 1957 to enable the government  to auction coal blocks

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Steel firms hit by Coal sale report

Steel stocks fell 0.3 per cent, weighing down on the broader indexes, after the CAG draft said India lost up to $210 billion in revenue by selling coal deposits too cheaply.

The report from the Comptroller and Auditor General's (CAG) office, leaked to an Indian newspaper, is making traders worried about a potential new scandal that could hurt foreign investments and hit a sector reliant on coal

"Steel, which is the backbone of country's infrastructure, will be in a big mess if this report by CAG is true, said Vivek Mahajan, head of research at Aditya Birla Money.

"This has the potential to scare off FDI as well as FIIs from India," he added, referring to the foreign investor flows that are crucial to Indian stock markets.

Jindal Steel And Power, one of the companies listed by the newspaper as benefiting from the reported sale of coal deposits, dropped 5.8 per cent.

A Jindal company official could not immediately be reached for comment despite several attempts at a response.

Copyright @ Thomson Reuters 2012

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Coal report not final, leak causes us anguish: CAG writes to Prime Minister

New Delhi:  The government has been accused of a massive coal scam by the opposition - both Houses of Parliament were adjourned this morning.  The latest crisis for the government is based on a draft report on coal mining by the government's auditor, the Comptroller and Auditor General (CAG). The leaked draft finds fault with the allocation of 155 coalfields to about 100 private and some public sector units or state-run firms between 2004 and 2009 instead of auctioning them off to the highest bidder.  The losses, according to the draft report, add upto Rs 10.7 lakh crore. The auditor does not make accusations of corruption, but says the government had extended "undue benefits" to the companies, and that in the absence of an auction, the sale of the coalfields was "subjective" and allowed "windfall gains."  (Excerpts from coal scam report by Govt auditor (CAG)

The Prime Minister oversaw the coal ministry for some of the period in question in the draft report. The government says it has so far not received a copy of the report. The Prime Minister's Office says that it got a letter from the Comptroller and Auditor General of India this afternoon. The letter allegedly states that "In the extant case the details being brought out were observations which are under discussion at a very preliminary stage and do not even constitute our pre-final draft and hence are exceedingly misleading...Pursuant to clarification provided by the Ministry in exit conferences held on 9.02.2012 and 9.03.2012, we have changed our thinking  .... In fact it is not even our case that the unintended benefit to the allottee is an equivalent loss to the exchequer. The leak of the initial draft causes great embarrassment as the Audit Report is still under preparation." (Prime Minister's Office on CAG report on coal mining)

The emphasis by the CAG on an auction echoes the Supreme Court's recent order which said the government must use an auction to distribute all natural resources.  That order came as the Supreme Court cancelled 122 telecom licenses that were sold, not through a bidding process, but to companies that were allegedly favoured in a distorted first-come-first-served process. In its draft report, the auditor says that the coal offered to firms was severely under-valued by the government and an auction of the coal-blocks would have helped ensure that the benefit of the low costs of coal production is passed on to the public.
India is the world's third-largest coal producer in the world after China and the United States.  State-run power company NTPC told Reuters it had made no windfall profits from the allocations and that the lower costs meant cheaper electricity for consumers.
Coal Minister Sriprakash Jaiswal said that the government used advertisements in newspaper ads to invite offers for the coal fields in question.  He also said that all state governments were consulted before the allocations were completed, and that BJP or Left led governments in states like West Bengal and Rajasthan had expressed reservations about an auction. "The coal blocks are allocated through a screening committee which is chaired by Coal Secretary," he said.   Before that, he explained, "We gave advertisements for allocation of coal blocks and invited applications...after the applications were received by us (Coal Ministry), the state governments were consulted and thereafter the coal blocks were allocated."

The Indian subsidiary of ArcelorMittal and steel makers Tata and Jindal Steel and Power, are among the companies named in the report. Jindal's controlling shareholder, Naveen Jindal, who is also a member of parliament, defended the policy of direct allocations, saying it had allowed private companies to jump-start production at mines left idle by state-run Coal India Limited, the world's single largest producer

The UPA has spent the last year trying unsuccessfully to beat its image as a government operating in a continuum of corruption and crisis, unable to implement reform or introduce transparency. "The Congress-led UPA government is looting the country. We can't allow this to happen. We have given notices under various rules today and will discuss with the leaders today and decide our next course of action," said Prakash Javadekar, BJP spokesperson as the party demanded a CBI probe into the alleged scam. Gurudas Dasgupta of the Left said, "This is a government of scams. All CAG reports indicate about misuse of public money...ministers, politicians are involved." 

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Excerpts from coal scam report by Govt auditor (CAG)

The government has been accused of a massive coal scam by the Opposition - both Houses of Parliament were adjourned this morning with the BJP demanding "It is a serious scam, the Prime Minister must answer."  The Prime Minister was in the Rajya Sabha when Opposition aggressively demanded a discussion on the alleged swindle. The BJP says the Prime Minister held the coal portfolio when the massive scam - worth 10.67 lakh crores according to the government's auditor - took place.   

The allegations are based on a report on coal mining by the government's auditor, the Comptroller and Auditor General (CAG). The report, accessed by a newspaper, says the government extended "undue benefits" totaling Rs. 10.67 lakh crore to commercial entities by allotting 155 coalfields without an  auction during 2004-09. The beneficiaries include 100 private companies and public sector units.

Here are the excerpts from the CAG report:

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40,000 Indians to be allowed to work in Europe, says report

London:  At least 40,000 Indians may be allowed to work in Europe, including 12,000 in Britain alone, under a secret trade plan between the European Union and New Delhi, a media report said, citing leaked documents.

The EU has proposed that 40,000 Indian workers will be admitted to Europe without any labour market test as part of the plan to boost export trade with New Delhi, the 'Daily Mail' reported, quoting a leaked copy of the EU/India Free Trade Agreement, which is due to be signed later this year.

Central to the agreement is the EU's offer on what is known as "Mode 4", which will allow Indian companies to bring temporary workers into the EU, the newspaper said.

According to the leaked papers, out of 40,000 Indians who would be allowed to work in Europe, Britain has been asked to take 12,000, which is 30 per cent of the total allocation, despite the UK making up 12 per cent of the EU's population. (Read: Britain may have to admit 12,000 Indian worker)

The 12,000 Indian migrants, who would be able to live and work in Britain for six months, will be in addition to people given visas under Britain's supposedly strict immigration cap, the newspaper said.

A large number of beneficiaries will be IT workers who already arrive in Britain from India in large numbers, the report added.

According to EU officials, in return for opening up the jobs market, countries such as Britain will be helped to land lucrative export deals.

The negotiations on the India deal -- which was first initiated by Former EU Trade Commissioner Lord Mandelson in 2007 and subsequently have been led by Business Department -- was going on in the shadows for years, the daily said.

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