EXPOSE coal scam
bidding. The assumption here is that the lowest tariff quoted by successful bidder factors in the advantage of captive mining. The Coal Ministry has so far allocated 216 coal blocks, with geological reserves of about 50 billion tonnes since June 1993. Out of these, 24 allocations have been cancelled. There have been several litigations over allocations as well as cancellations. A few critics and analysts have mistaken the CAG’s windfall calculation as revenue loss to the exchequer. The CAG has neither considered nor valued other benefits, such as cashless equity reaped by CBAs and profits to be earned by MDOs. The CAG has also not estimated the presumptive and actual revenue loss to the states. It is an extremely difficult task and yet worth trying. No two coal blocks are identical, unlike the radio-spectrum of the 2G scam fame. The value of a coal block depends on
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hus, the CAG should have relied on timelines specified in CBA guidelines to compute the loss of royalty or dead rent due to the inordinate delay in the development of blocks. The reasons for delays are many. These include availability of domestic coal at cheap prices even after decontrol of coal prices in January 2000. As domestic and global coal prices soared, and the demand for blocks turned into a scramble, it dawned on the CBAs that they were sitting on a jackpot. This was corroborated by subsequent MDO deals or tendering competitions arranged by CBAs for their respective blocks. Had the blocks been auctioned, the states and not the CBAs would have collected facilitation fee per tonne of coal, similar to the revenue-sharing arrangement in the telecom services sector, apart from existing royalty. They could have also asked for upfront, one-time licence fee from bidders. Such fee would certainly be realisable in the case of fully explored blocks having prime grades of coal. The CAG could have averaged different rates of facilitation fee per tonne of coal negotiated by the CBAs with the MDOs. It should have then multiplied the average fee with total reserves of allotted coal blocks to arrive at the gross revenue foregone by the states due to the Centre’s feet-dragging over auctions. Different percentages of cashless equity or sweat equity, ranging from 26 per cent to 51 per cent that CBAs have secured in mining JVs should be roughly valued to give
photo: himanshu joshi
Some have mistaken the CAG’s windfall calculation as revenue loss to the exchequer. The CAG has neither considered nor valued other benefits, such as cashless equity reaped by CBAs and profits to be earned by MDOs. The CAG has also not estimated the presumptive and actual revenue loss to the states.
factors such as geology, reserves, mining techniques, size of reserve, its location and the quality or grade of coal.
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gfiles inside the government
vol. 6, issue 2 | May 2012
www.gfilesindia.com