My views on CAG report : Part 2 - What the report should have addressed

CAG Report - Reading between the lines

Part 2 - What the report should have addressed

The CAG report on Coal bloc allotment just looks at the financial aspect overlooking the real time working as well as operation and the legalities involved in allotment of coal bloc and their operations there after.

How Coal Bloc is allotted?

Coal Block allotment to end user like Power Producer, Cement Producer, Steel Producer and other is undertaken on the basis of the coal requirement of the plant with the State, where it is being opened and will used for production, and respective ministry recommendation. Ministry of Coal sets up a committee consisting of representative from various ministries, state government officials for allotment of coal block. 

Production from the allotted coal block is fixed on the basis of coal requirement of the end use plant. If the operator ends up producing more coal from the block than sanctioned then the excess production is to be given to Coal India nearest subsidiary for disposal.

Malpractices/Kickbacks

In case of Reliance, Tata etc. coal block allotted by Ministry of coal for a specific project have been allowed not only to produce more coal than required for the specific project but also use the excess produce to any of their other projects rather than sell is to Coal India as expected.This is clearly AGAINST the framed guidelines of coal block allotment rule and regulation.

Also, some certain end user unethically share their allotted coal block to other end user with hefty premium for coal extraction. This is achieved by inviting partners and selling them more than 90% stake in the coal bloc against the cost of coal extraction and the profit to be realized by selling the extracted coal.Now, its pretty evident that the incoming partner will or has to sell the coal at higher premium if  they want to make profit thus increasing the production cost of the end output - Power, cement etc - which gets passed on to the common man. 

The same malpractice is being practiced by state governments and state mineral development corporation of MadhayaPradesh, Chattisgarh,Goa, Andhra Pradesh. Allotted coal bloc is offloaded to private parties at hefty premium which results in increased production cost of end product.

This whole practice is AGAINST the ethics of coal block allotment.

Rather than just reporting the loss incurred and debating about it , CAG should look into the inner real time working of the allotted coal bloc and ensuring no kickbacks are allowed as well as end users involved in malpractices are brought to books.