CAG on Coal Scam : Crony Capitalism And Mega Corruption

THE Comptroller and Auditor General (CAG) of India has submitted three reports to the parliament this week – one on the allocation of coal blocks and augmentation of coal production; another on the implementation of public-private-partnership (PPP), Indira Gandhi International Airport, Delhi; and one on the Ultra Mega Power Projects (UMPP) under Special Purpose Vehicles (SPVs), all for the year ending March  2012.

Seen in combination with the earlier CAG report on the 2G spectrum allocation, these reports only reconfirm, if any reconfirmation was ever necessary, that the neo-liberal economic reform trajectory of this Manmohan Singh government is leading to crony capitalism of the worst order.  In the process, it has opened up newer avenues for mega corruption which are literally looting our country’s resources for personal windfall gains.

While the 2G spectrum scam resulted in what the CAG terms as a notional loss of Rs 1.76 lakh crores, the allocation of coal blocks is estimated as having led to a windfall financial gain to private operators to the tune of Rs 1.86 lakh crores. A bulk of this would have accrued to the national exchequer if these allocations were made in a competitive and transparent manner. The concept of allocation of captive coal blocks through competitive bidding was first made public on June 28, 2004 by secretary, Coal. Following this, a proposal was submitted by him in July 2004 for an objective and transparent manner of allocating coal blocks which was accepted by the coal ministry.  The CAG report notes, “Despite these facts, the GOI (February 2012) is yet to finalise the modus operandi of competitive bidding.”

It is this question that the government has to answer to the parliament and the country.  Importantly, the prime minister has to answer as he personally held the Coal portfolio for a major part of this period.  The CAG has clarified that the Coal secretary recommended options in May 2004 and which the ministry accepted in October 2004.  Yet, the government has failed to operationalise its own decision.

The government unofficially is  making it known that it did not go in for competitive bidding as many state governments had opposed it and, instead, asked for direct allocations. There is a point in the state governments’ opinions.  The state electricity boards and the public sector electricity producing units (like the NTPC) generate and provide power to the people.  The coal that is required for this purpose and for future expansion which is so acutely needed by the people (recollect that the UPA government declared to provide “power to all” Indians by 2012) should have been set aside and the rest should have been allotted through a transparent auction process.  Instead of doing this, the government decided on direct allocations that resulted in windfall profits for private operators.

The other CAG report on UMPP concludes that permissions to use coal by major Indian corporates “not only vitiated the bidding process but also resulted in undue benefit to Reliance Power Ltd.”  Out of the 16 UMPPs identified so far (March 2012), the Power Finance Corporation floated 12 SPVs for this purpose.   So far, only four UMPPs have been awarded and only one unit of 800 MW at Mundra has been commissioned.  UMPP is an ultra mega power project using supercritical technology having a capacity of around 4,000 MW and is developed on build, own and operate basis by private corporates.

With regard to the PPP  of Delhi Airport, the CAG report concludes that its observations “indicate that whenever the Delhi International Airport Ltd (operated on a PPP basis by the GMR group) has raised an issue regarding revenue to accrue to it or expenditure to be debited to government, in contravention of the provision of the Operation Management Development Agreement (OMDA), the ministry and the Airport Authority of India have always ruled in favour of the operators and against the interests of the government.”

The CAG is a constitutional authority whose basic responsibility is to identify lapses leading to governance failure.  Uncomfortable with its exposures, sections of the UPA government have begun alleging that the CAG is exceeding its constitutional mandate.  In the context of the earlier reports when such allegations were raised, the ministry of finance in June 2006 issued a clarificatory order establishing the CAG’s unfettered mandate to determine the scope and extent of its audit.

Like in the coal block allocations, in the case of the 2G spectrum allocation, the CAG has pointed out that it was the government itself that favoured auctions or market based pricing. First, the prime minister followed by the finance secretary suggested this, which was ignored by the then telecom minister A Raja.  The joint parliamentary committee is now examining why despite such advise by the PM himself, this method was not adopted by the UPA government resulting in a loss of Rs 1.76 lakh crores.

In all these four instances, it is crystal clear that the government negated its own decisions and procedures in order to provide private corporates with windfall profits.  This is nothing but crony capitalism.  A system that favours huge profits for the corporates, a system that opens up newer and newer  avenues for mega corruption, a system where, as a result, decisions are taken on the basis of `sweet heart’ deals and a system where the people at large are deprived of the basic needs for a decent livelihood.

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  1. a.g.rajmohan says:

    Having fully immersed in scams and corruptions of unimaginable magnitude now Congress is trying to find fault with the CAG and the systems it adopts in auditing. Unfortunately the misdeeds being debated so much do not reach the common man who votes and the one who knows and debates does not vote.

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