By Not Auctioning Coal Blocks between 2004 & 2009 Government incurred a Loss of Rs 10.67 lakh crore

According to comptroller and auditor general’s draft report titled ‘Performance Audit Of Coal Block Allocations’, the government lost Rs 10.67 lakh crore by not auctioning coal blocks between 2004 and 2009.
155 coal blocks were given to commercial entities without auction between 2004 and 2009 thereby causing the exchequer a loss of Rs 10.67 lakh crore at 31 March 2011 prices . The estimated loss is six times higher than the loss figure of Rs 1.76 lakh crore suffered for the 2G scam.
The government extended undue benefits totalling a mind-boggling Rs 10.67 lakh crore to commercial entities between 2004 and 2009. The beneficiaries include some 100 private companies, as well as some public sector units, in industries such as power, steel and cement.
How CAG estimated the loss
An estimate of the cost of production for each block was arrived at first by taking into account the actual cost of production in a similar Coal India mine for the same year. Difference between CIL’s sale price and cost of production was then multiplied by 90% of the reserves in each block. The figure obtained was the windfall gain for that block.
CAG also specified the reason behind taking 90% of the total reserves rather than the entire lot. According to CAG, detailed exploration establishes reserves at a confidence level of 90%.
As per CAG’s report, the coal ministry had maintained in 2004 that the chances of any allocatee not being able to recover this much from the reserves would be, if at all, very remote. CAG added in this respect that the actual amount of gain to the allocatees could possibly change depending upon the mining plan, cost of extraction of coal, market price of coal and quality.
On the basis of the calculation made on the basis of the 90% of coal reserves indicated in the geological reports for each block, the auditors worked out a total of 33,169 million tonnes (MT). Experts considered the figure sufficient to fuel over 150,000mw of generation capacity for 50 years.
Beneficiaries
CAG report listed both private entities and public utilities as beneficiaries of the alleged largesse. private companies were believed to have benefitted more than Rs 4.79 lakh crore of the giveaway, while around Rs 5.88 lakh crore went to central and state government utilities.
The major private sector beneficiaries include Tata Group entities, Jindal Steel & Power Ltd, Electro Steel Castings Ltd, the Anil Agarwal Group firms, Delhi-based Bhushan Power & Steel Ltd, Jayaswal Neco, Nagpur-based Abhijeet Group and Aditya Birla Group companies. Essar Group’s power ventures, Adani Group, Arcelor Mittal India, Lanco Group and a host of small to medium players also figure in the list.
The list however did not name Reliance Power, which is setting up the Sasan and Tilaiya ultra-mega power projects. Reliance Power is missing from the list because the section on Windfall benefit to private companies does not include 12 coal blocks given for the government’s showpiece power projects since they were allocated through a tariff based competitive bidding route.
Public sector entities that benefited the most are- central generation utility NTPC and trading firm MMTC, several West Bengal government corporations, and mines and mineral development corporations of Chhattisgarh, Jharkhand and Madhya Pradesh.