CAG Report No 20/16 on E-Auction of coal mines- public interest concerns


Shri A L Meena
Union Coal Secretary


Dear Shri Meena,

I refer to the CAG Report No 20/2016 on E-Auctions conducted by your Ministry for allotment of coal blocks, following the judgement of the Hon’ble Supreme Court holding earlier coal block allotments to be illegal.

In particular, I invite your attention to the following observations of the  CAG:

Inadequate competition:

in the auction of Sarisatolli and Trans Damodar coal mines, which were put up for auction on 27 December 2014, West Bengal Power Development Corporation Limited (WBPDCL) was disqualified (February 2015) for non-payment of additional levy. This was done despite the fact that for the coal mines for which WBPDCL was held as defaulter, the prior allottee, as per the amended definition, was a JV company i.e. Bengal Emta Coal Mines. Therefore, this disqualification was not as per the existing provisions….

Disqualification of WBPDCL from participating in the auction of Sarisatolli and Trans-Damodar coal mines, on the basis of it being a prior allottee and not depositing the additional levy within the prescribed time, was not as per the existing provisions”

“Audit noted that in 11 out of the 29 coal mines successfully auctioned during the 1st and 2nd tranche, QBs ranging between two and three were from the same company/parent-subsidiary company coalition/JV coalition. Audit could not draw an assurance that the potential level of competition was achieved during the Stage II bidding of these 11 coal mines auctioned in the first two tranches”

A Case study in Chapter 5 of the report refers to a particular coal block in the case of which a single bidder thwarted competition by setting up subsidiaries, which raises concerns about price discovery and the unauthorised means adopted by the bidder to corner a coal block, making a mockery of the bidding process.

Unauthorised diversion of coal from captive mine:

“MOC’s replies need to be viewed in light of the fact that though the vesting order of Sarisatolli coal mine was issued on 23 March 2015 and the proposed diversions were approved in August 2015, but the intimations of the proposed diversions were given to the MOP, CERC, SERC and the concerned State Government only on 20 January 2016, after the issue was raised by Audit”

When the CAG findings became public, there were news reports at that time ( referring to how some bidders short-circuited the auction process to subvert competition at the cost of genuine price discovery.

Apparently, your Ministry, for some reason, was reluctant to act on the CAG report at that time.

More recent news reports ( refer to the same CAG report of 2016 on one particular private business conglomerate choking competition to coirner a valuable coal block, apparently on the basis of information accessed from the CAG office. If what has been reported is correct, it calls for a comprehensive investigation, as such a manipulation of the sanctity of the auction process would have defeated the very idea of competitiuon that an auction procedure was intented to achieve.

In particular, I wish to raise the following questions for the Coal Ministry to examine.

  1. CAG’s findings in this case were specific and have implications for the integrity of a competitive auction. Did the Ministry get more details from the CAG office and take immediate follow-up action?
  2. If a bidder has tried to hoodwink the Ministry, should not the Ministry have initiated action against the concerned bidder and revoked the coal block allotment with a deterrent penalty?
  3. According to the CAG report, there were at least 11 such cases of aborted competition. In the light of the earlier judgement of the Hon’ble Supreme Court, was it not incumbent on the part of the Ministry to have taken the CAG’s findings with a sense of seriousness they deserve and taken the investigation to its logical end?
  4. One of the findings in the CAG report is about unauthorised diversion of coal by a business group. Did the Ministry adequately penalise the concerned group?

It is somewhat distressing that, instead of the Ministry taking the CAG findings seriously and taking action, it should remain silent, while it is the media  investigations that should bring the details underlying the CAG  report to the public domain.

It is ironic that the present government which rightly followed up on an earlier CAG report and adopted competitive resource auctioning as the means to discover the price of scarce natural resources such as minerals and spectrum, the same government should fail to take cognizance of the revealing findings that emerged from a subsequent CAG report.

I hope that your Ministry will take necessary action now, though belatedly.


Yours sincerely,

E A S Sarma
Former Secretary to Government of India



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