`Rs 1,054 cr loss in CAG report hypothetical`
New Delhi: Chhattisgarh government on Sunday said that Rs 1,054 crore potential loss pointed out by CAG in its report on coal block allocation in the state is "hypothetical".
Comptroller and Auditor General (CAG), in its audit report (Civil & Commercial) for 2010-11, had in April pulled up Chhattisgarh Mineral Development Corp (CMDC) Ltd for accepting a single bid for commercial mining of coal from a block allocated by the Centre.
According to a statement by the government of the BJP- ruled state, Coal block Bhatgaon-II and Bhatgaon-II Extension were allotted by the central government to CMDC for commercial exploitation. CMDC decided to develop these blocks through a Joint Venture with a coal mining company with CMDC retaining 51 per cent equity.
"For selection of the JV partner with 49 per cent equity, CMDC resorted to open competitive bidding. Number of bids received for Bhatgaon-II and Bhatgaon-II Extension block were five and two, respectively of which two and one, respectively were found meeting the qualifying criteria.
"As per the bidding conditions, bidders were required to submit offers regarding the minimum amount to be paid by them to CMDC for each tonne of coal mined," it said.
CMDC was, thus, to receive 51 per cent of the net profit from the mining of coal or the minimum assured amount offered by the successful bidder, whichever is higher.
"Thus, this is a case of selection of JV partner through competitive bidding for development of coal blocks and not that of allotment of coal block," the statement said.
It said CMDC as also the state government had brought out the facts to the notice of the Chhattisgarh Accountant General (AG). "However, AG not being equipped by geological expertise, failed to appreciate the technical differentiation between the two blocks and arrived at hypothetical loss by comparing uncomparables," it said.
"SMS Infrastructure Ltd. Was the successful bidder for both the coal blocks, who offered 460 per cent of royalty and 108 per cent of royalty to CMDC amount, over and above the statutory payments," the statement said.
"The decision on the offers was taken by the board of directors of CMDC after satisfying itself that the relatively lower offer for Bhatgaon-II Extension block was reasonable having regard to fact that comparative geological data clearly suggested that the cost of mining of coal from Bhatgaon-II Extension would be substantially higher than Bhatgaon-II block," it said.
The statement said that Bhatgaon-II Extension block is situated next to the river Mahan, necessitating extra cost of bunding and pumping of water, has relatively thinner seams and higher over burden and higher cost of rehabilitation and settlement.
The state government would now place its case before the State Legislature Committee, it said.
The CAG report said that the Centre in July 2007 allocated the Shankarpur coal block comprising Bhatgaon-II and Bhatgaon-II Extension to CMDC.
CAG felt the company should have either extended the tender opening date or re-invited tender to "generate fair competition instead of justifying the low rate quoted by the lone bidder".
"This resulted in potential loss of revenue of Rs 1,052.20 crore," CAG said.
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