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Energy

Coal Auctions, Allocations Get Far, Far Less Than What Modi Govt Estimated

This gives credence to the suspicion that the Modi government had exaggerated its revenue estimates to support former CAG Vinod Rai’s controversial theory that the allocation of captive blocks by the previous UPA government to private players without following the auction route had led to Rs 1.86 lakh crore of notional loss to the exchequer.

New Delhi: The Narendra Modi government had claimed that coal-bearing states will together earn revenue of Rs 3.35 lakh crore from 67 captive coal blocks allocated by it during February-March 2015, of which 33 were auctioned. Against that, they have received just Rs 5,684 crore in the 3.5 years between February 2016 and July 2018, according to a report in Business Standard.

This gives credence to the suspicion that the Modi government had exaggerated its revenue estimates to support former Comptroller and Auditor General (CAG) Vinod Rai’s controversial theory that the allocation of captive blocks by the previous UPA government to private players without following the auction route had led to Rs 1.86 lakh crore of notional loss to the exchequer.

“Potential revenue of more than Rs 3.35 lakh crore to flow to the states from auction and allotment of coal blocks,” then coal secretary Anil Swarup had tweeted in March 2015. The projection of Rs 3.35 lakh crore revenue flows is over 30 years.

The Centre also issued a press release to amplify what Swarup had claimed in his tweet.

“India has hit a gold mine with the recently concluded auction of 29 coal mines in two phases. The public exchequer continues to swell on revenue from coal block auctions. The total proceeds from the coal mines auctions have crossed Rs 1.93 trillion surpassing CAG’s estimate of Rs 1.86 trillion losses on account of allocation of 206 captive coal blocks without auction since 1993,” the release said.

Moreover, Prime Minister Narendra Modi was also quoted in the release as saying, “Fetching of over Rs 2 trillion from auction of just 33 coal blocks has shown that policy-driven governance can rid the system of corruption.”

In August 2014, the Supreme Court cancelled the allocation of 204 coal blocks made to the public and private sector, citing irregularities in the procedure followed by the coal ministry. This left the industry staring at an impending fuel crisis.

However, the NDA government speedily brought the Coal Mines (Special Provisions) Act 2015 to handle the reallocation of cancelled coal blocks. The action of producing coal blocks was also held expeditiously, which helped stave off the looming fuel crisis.

While private players had to participate in an auction to bag captive coal blocks to meet the fuel requirements of their power and metals plants, allocations were made to Central and state government utilities on a nomination basis.

The coal ministry used the reverse bidding route to allocate coal blocks to private players.

Has reverse auction benefited electricity consumers?

Following judicial intervention in the 2G and captive coal block allocations during the UPA regime, it was decided that all natural resources should be auctioned to ensure transparency and fairness in allocation.

When coal minister Piyush Goyal introduced reverse bidding in the allocation of coal blocks and linkages – where the bidder who promises to charge the least from the consumer wins the block – it was with the stated aim of ensuring that consumers get the benefit of low coal prices.

For example, in a press conference in mid-2017, Goyal said that Shakti (Scheme for Harnessing and Allocating Koyala Transparently in India) would be a transformational policy for auction and allotment of coal linkages, and will lead to affordable power, access to coal and accountability in the allocation of coal.

However, reverse auction may not have lived up to those promises. For example, while private power producers have benefited immensely from the allocation of coal through a reverse auction held under the Shakti scheme recently, electricity consumers have been fobbed off with token tariff concessions.

Under the much-hyped policy, Coal India (CIL) allocated long-term linkages of over 27 million tonnes of coal to ten private power plants following an auction conducted in September last year. Bidders made token concessions by offering to reduce the existing electricity tariff by 1-4 paise. In return, they were assured coal supply of over 27 million tonnes per annum for 25 years at CIL’s notified price, which was about Rs 726 per tonne cheaper than the price they were paying at the time for the spot e-auction coal to fire their plants.