CAG report on coal is disputable, flawed: PM

Refusing to be on the back foot on coal block allocation, PM rejected the CAG`s observations as "misleading" and "flawed".

Updated: Aug 28, 2012, 00:23 AM IST

New Delhi: Refusing to be on the back foot on coal block allocation, Prime Minister Manmohan Singh today rejected the CAG`s observations as "misleading" and "flawed" and blamed Opposition parties for thwarting his government`s efforts to bring a policy of competitive bidding.

Speaking inside Parliament as well as outside, he took "full responsibility" for the decisions taken by the Coal Ministry whose charge he directly held for some time and asserted that at "any allegation of impropriety is without any basis and unsupported by facts".

He attacked BJP for disrupting Parliament and dared it to have a debate in the House to let the country judge the truth while declaring that "we have a very strong and credible case" as CAG`s "observations" are "clearly disputable".

In both Houses, BJP chanted demands for his resignation as Singh rose to speak. As a result, he read out a few portions of his four-page statement before laying it in Lok Sabha and Rajya Sabha which were repeatedly adjourned.

Conscious that the CAG reports are normally discussed in Parliament`s Public Accounts Committee where the ministry concerned responds, he said he was departing from this established procedure "because of the nature of the allegations that are being made and because I was holding the charge of Coal Minister for a part of the time covered by the report."

Responding point-by-point to the observations of the CAG which had pegged the loss at Rs 1.86 lakh crore, he said even if the government auditor`s contention that benefits accrued to private companies were accepted, "their computations can be questioned on a number of technical points."

He asserted that aggregating the "purported gains" to private parties "merely on the basis of the average production costs and sale price of CIL (Coal India Limited) could be highly misleading".

The Prime Minister termed as "flawed" the premise of the
CAG that the competitive bidding could have been introduced in 2006 by amending the existing administrative instructions, saying it is "based on a selective reading" of opinions given by the Department of Legal Affairs.

As coal blocks were allocated to private companies only for captive purposes for specified end-uses, it would not be appropriate to link the allocated blocks to the price of coal set by CIL, he said.
Facing BJP demand for his resignation, Singh sought to corner the Opposition saying the policy of allocating coal blocks without competitive bidding existed since 1993 and previous governments also allocated "precisely in the manner that the CAG has criticised".

He also said major coal and ignite bearing states like West Bengal, Chhattisgarh, Jharkhand, Orissa and Rajasthan "ruled by Opposition parties" were "strongly opposed" to a switch over to competitive bidding process.

On the charge of delay in bringing the Coal Mines Nationalisation (Amendment) Bill, 2000, to facilitate commercial mining by private companies, he said it was pending in Parliament for a long time owing to "stiff opposition from the stakeholders" and government wanted broader consultations and consensus.

Singh said these state governments felt that a switch over would increase the cost of coal, adversely impact value addition and development of industries in their areas and dilute their prerogative in the selection of leases.

He said the issue was "contentious" and the proposed change to competitive bidding required consensus building among various stakeholders with divergent views, which is inherent in the legislative process.
Citing instances, he said the then BJP Chief Minister of Rajasthan Vasundhara Raje had written to him in April 2005 opposing competitive bidding and arguing that it was against the spirit of the Sarkaria Commission recommendations.

The Prime Minister named another BJP Chief Minister Raman
Singh (Chhattisgarh) saying he had written to him in June 2005 seeking continuation of the extant policy of coal block allocation.

He said the Chhattisgarh Chief Minister had requested that any change in coal policy be made after arriving at a consensus between the central government and the states.

"The state governments of West Bengal (Left) and Orissa (BJD-led) also wrote formally opposing a change to the system of competitive bidding," Singh said.

The coal block allocation could not be held back till consensus was arrived at as it could affect GDP growth, the Prime Minister said.

"It is unfortunate that the CAG has not taken these aspects into account," he said.

Singh said the government has initiated action to cancel the allocations of allottees who did not take adequate follow-up action to commence production and promised "due action against wrong doers" on the basis of the on-going CBI investigations into the allegations of malpractices.

He said it has always been the intention of the government to augment coal production by making available coal blocks for captive mining through transparent processes and guidelines, which fully took into account the legitimate concerns of all stakeholders, including the state governments.

He said the government had initiated a proposal to introduce competitive bidding by formulating appropriate rules but coal and ignite bearing states voiced their opposition to the proposed switch over in a meeting convened by the PMO on July 25, 2005.

It was, therefore, decided in the meeting to "continue with the allocation of coal blocks through the extant Screening Committee procedure till the new competitive bidding procedure became operational.

"This was a collective decision of the Centre and the state governments concerned," Singh said.