National auditor picks holes in coal mines auction by NDA govt

In an embarrassment to Prime Minister Narendra Modi-led NDA government, the Comptroller and Auditor General (CAG) of India has picked holes in the e-auction of coal mines, which were commissioned by the Centre last year. 

The CAG, in its latest report, has said that multiple bids by corporate groups through joint ventures (JVs) or subsidiaries did not give an assurance that potential level of competition was achieved in the first two tranches.

In the report, which was tabled in Parliament on Tuesday, the CAG said that competition may have been restricted in auction of 11 coal blocks on account of multiple bids by corporate groups made through JVs or subsidiaries. “Audit could not draw an assurance that the potential level of competition was achieved during bidding of 11 coal mines auctioned in the first two tranches,” it said.

In 11 out of 29 coal mines successfully e-auctioned in first and second tranche, a number of qualified bidders (QBs) in the e-auction stage were from the same company/parent subsidiary company coalition/joint venture (JV), CAG said.

It also said that the coal ministry did not have norms for rejection of bids. The ministry had rejected bids for three coal blocks, including those placed by Jindal Steel and Power, arguing that they were low.

The objective of the report was to ascertain efficacy and robustness of the e-auction design, the report said, adding that the e-auction system of all acting coal mines is an improvement over the past system and that it ensured transparency.

In a scenario where the standard tender document (STD) allowed the participation of JV and simultaneously limited the number of QBs which could participate in the e-action, 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.

In the third tranche, the Coal Ministry amended the clause of JV participation with the objective of increasing participation, the CAG report added.

Reacting on the report, an official source said that as only 6 per cent of the qualified bidders were joint ventures companies and only one successful bidder was a JV company, it is clear that this provision did not restrict competition.

“The Delhi High Court has upheld this provision of the auction. It has stated that the process is neither arbitrary nor irrational or designed to favour any particular bidder and has worked out well,” the source said.

Inconsistencies and inaccuracies in following some of the assumptions and various errors in computing of intrinsic values resulted in under-determination of upfront amounts in 15 blocks, under-determination of floor prices in 6 non-regulated sector coal mine and revised fixed rates in all nine power sector coal mines, CAG said.