India’s official auditor on Friday accused the government of losing more than $33-billion (U.S.) in potential revenue by transferring coal mining blocks too cheaply to private companies, reigniting a row about corruption and prompting calls from the opposition for the resignation of Manmohan Singh, prime minister.
Mr. Singh’s Congress-led coalition immediately disputed the findings of the Comptroller and Auditor-general (CAG), arguing that big investments in mining and power stations were essential in this energy-hungry nation.
Officials also noted that the calculation of revenues forgone was less than a sixth of the shockingly large $210-billion figure leaked by the CAG in March. In an attempt to explain the wide discrepancy, the CAG said it had on this occasion excluded the financial benefit to government companies, considered only opencast mines and added financing expenses to the cost of coal production.
Successive Indian governments have failed to promote sufficient investment in the state-dominated coal mining sector or in electricity production, a policy failure that has left the country desperately short of power and contributed to two days of grid failure last month. More than 600 million people were left without electricity.
But such attempts as there have been to develop infrastructure have frequently generated political rows and allegations of corruption, placing further legal and bureaucratic obstacles in the way of investment.
In one previous report, the CAG said India had lost $39-billion in revenues through the misallocation of second-generation mobile telephone licences in 2008. These licences were in turn cancelled by India’s Supreme Court earlier this year, following legal challenges.
On Friday, the auditor released three reports, one on the allocation of coal blocks, another on “ultra-mega” power projects and a third on the public-private partnership for New Delhi’s international airport.
Politicians of the opposition Bharatiya Janata party said the reports showed the government was “looting” the country. Sushma Swaraj, BJP leader in the lower house of parliament, said that the coalition’s term of office “has been full of scams and each scam is bigger than the previous one.”
Shares in Reliance Power, a company controlled by billionaire Anil Ambani, fell 6 per cent on Friday after the report on power projects said the group had gained an “undue benefit” of $5.2-billion by using coal allocated for one power station in another project. Other companies named, including Adani Power and Jindal Steel & Power, also closed lower.
Mr. Ambani’s group won three coal blocks as part of a deal to build a 4,000-megawatt “ultra mega” power station at Sasan, in the central Indian state of Madhya Pradesh. Reliance was later allowed to use this coal for a second project, a decision which was criticized by the auditor and which has also been challenged in court by rival Tata Power.
In a statement, Reliance said that the coal decision had been approved on two occasions by a committee of government ministers, while the original Sasan bid had been tendered as part of an open competition.
“The coal mines allotted to UMPPs [ultra-mega power projects] are the only coal blocks allotted through tariff-based competitive bidding process so far in India,” the group said.
Although the cancellation of the coal licences remains unlikely, analysts said the combination renewed uncertainty that possible future court challenges would limit fresh investment in India’s ailing power sector.
“A number of the blocks allocated to these companies have never been developed, often because a lack of environmental clearances,” says Salil Garg, a power analyst at Fitch, the ratings agency. “After this report some of these players will become more cautious in investing more money into these blocks because of uncertainty over the future.”Report Typo/Error