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Home News Power Sector News UPA heads for clash with CAG on coal

UPA heads for clash with CAG on coal

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CAGThe UPA government, facing intermittent fire from the Comptroller and Auditor General (CAG) over lapses in handling public funds and assets, could find itself pitted against the country's top auditor yet again. In its reply to the CAG's queries on Reliance Power being allowed to divert surplus coal from its captive mines, the power ministry is likely to use the same public interest logic it used to defend itself in an affidavit filed in the Supreme Court in a dispute with Tata Power.

The draft CAG audit report on ultra mega power projects (UMPPs) says, inter alia, that the exchequer lost R1.2 lakh crore when the ministry allowed diversion of coal from captive mines that was meant to provide feedstock to UMPPs.

Official sources said in its response, the power ministry will reiterate its argument in the affidavit that the diverted coal was meant for use in power generation alone and. hence, the question of losses did not arise at all. The ministry will also say that due to the proximity of Reliance's Chitrangi plant to Sasan, surplus coal from the mines could be utilised for the plant with minimal transport cost.

According to the ministry, it made no economic sense in not using the surplus coal and all bidders for the Sasan UMPP were aware that surplus fuel could be allowed to be diverted for other projects.

The ministry could also claim that this was not the first case where a developer was allowed to divert surplus coal from captive mines with government permission. Even the letter issued to a joint venture in which Tata Power is a partner for allocation of the Mandakini coal block in Orissa expressly stated that surplus coal could be disposed of as per the approval of the government, the ministry had stated in the affidavit, a stand it is likely to take in its reply to the CAG as well.

According to the CAG, the diversion violated bid conditions for allocating the Sasan UMPP, causing a R42,000-crore loss to the exchequer. The auditor has sought clarifications from the power ministry to its observations in the draft report.

"It is not necessary that coal production from mines will exactly meet the requirement of a power project. Nor can mines be split to match the fuel requirement of the project," an industry expert said.

The decision to allow coal diversion was taken by the empowered group of ministers (EGoM) on the request of the Madhya Pradesh chief minister and not at the behest of Reliance Power as submitted by the petitioner, the power ministry told the apex court.

All relevant factors such as the urgency to augment power availability in states, distance between coal blocks and the Chitrangi project and the imperative and compelling need to increase the power availability of the country in general and Madhya Pradesh in particular were considered.

The decision was based purely on public interest and so, the suggestion that there was conferment of largesse for private gains is incorrect, the ministry may write in its reply to the CAG.

"The decisions taken by the government are entirely in accordance with law and in overwhelming public interest. There has been no conferment of any largesse for private gains or any unexpected windfalls as far as power providers are concerned. Since the power generated from the Chitrangi project is required to be sold through competitive bidding route, it is in public interest and national interest," the power ministry had said in its affidavit to the Supreme Court.

Source- Financial Express


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