How Big is the Coal Blocks Scam in India ?

Yet another feather in the Scandals / Scams Cap of Ruling Dr Manmohan Singh Government – Coal Blocks Allotment Scam. Indian Media carried reports of the draft report by the Comptroller and Auditor General (CAG) on the losses incurred by the Government because it gave away coal blocks without any consideration in the past. The number quoted was Rs10.77lakh crore (~$211bn) and the time period was 2004-2009 [Government of Congress under Manmohan Singh]

However, to save the embarrassment of none other than the Prime Minister himself, the PMO sought a letter from the Office of CAG and released it which stated,

In the extant case the details being brought out were observations which are under discussion at a very preliminary stage and do not even constitute our pre-final draft and hence are exceedingly misleading. … Pursuant to clarification provided by the Ministry in exit conferences held on 9.02.2012 and 9.03.2012, we have changed our thinking …. In fact it is not even our case that the unintended benefit to the allocatee is an equivalent loss to the exchequer

And the Truth of Coal Block Allocation – Of the 195 net blocks allocated so far, 39 are pre 2003 and the rest are after it. Of these 99 were allocated to private sector (77 post 2003).

We believe the final CAG report will be very important in terms of what it says on the allocation policy and the revenue hit if any to the exchequer. What one needs to focus on is will the noise lead to any potential prospective change to coal policy. We believe the biggest worry is around what happens to coal blocks which are allocated but currently not in production and for which companies are setting up projects.

So let us keep our fingers crossed until the Correct Numbers come out of the Office of the CAG on Loss of Revenue to the Exchequer by the new CoalGate Scam 🙂

Update on 26/03/2012 – Coal Block Allotment Scam in India
We have got our hands on the report of the CAG office conducting the Performance Audit of the Coal Block Allocation [PDF, 15 MB} which turns out to be a Mother of All Scams in India. Here is what the report says, [Page 84]

Audit Observed that the procedure followed for allocation of coal blocks lacked transparency and it failed to arrive at the optimal price at which allocation of blocks should have been made. MoC had recognized (June 2004) that there was substantial difference between the price of coal supplied by Coal India Ltd – CIL and the cost of coal produced through coal blocks allocated for captive mining and as such there was windfall gains to the allocattees. Audit worked out such windfall gains at Rs 6.31 Lakh Core [ Rs 3.37 Lakh Crore to PSUs and Rs 2.94 Lakh Crore to Private Sector Companies] based on the prices prevailing during the year of allocation on constant cost and price basis.

So it is easy to conclude that the Coal Block Allocation Scam in India under the Congress Government is of 6.31 Lakh Crore or USD 126 Bn Loss of Revenue to the Government. Imagine the amount Politicians, Ministers and Bureaucrats in the Government Pocketed from this Scam and potentially moved it to the Swiss Bank 🙂