Coal scandal cost India billions, auditor says

NEW DELHI // India's national auditor said Friday the government lost huge sums of money by selling coal fields to private companies without competitive bidding, adding to massive losses from dubious auctions of other state assets.

The report by the Comptroller and Auditor General sparked a new storm of criticism of a government that has been floundering under a crush of scams and corruption accusations and has been unable to push through critical economic reforms.

Over the past year, a raft of scandals have surfaced involving ministers and senior officials over corruption charges in the hosting of the 2010 Commonwealth Games and the sale of cellphone spectrum that auditors said lost the country billions of dollars.

The auditor's report to Parliament estimated that private companies got a windfall profit of $34 billion because of the low prices they paid for the fields. The report said an auction would have given the government some of that money.

It revealed that 142 coal fields were sold since July 2004 to private and state-run companies. Some of the coalfields bought by private companies in 2004 did not begin production till 2011, while some companies later made enormous profits by selling the coal mines.

The report criticized the sales procedure that was followed and said the allocation of coal fields "lacked transparency and objectivity."

The auditors said the allocations were made on the recommendation of state governments. They exonerated Prime Minister Manmohan Singh even though he was running the coal ministry part of that period under review.

India has been facing a severe shortage of coal to fuel its power sector. Last month, more than 600 million people in the country went without power for hours after the electricity grid collapsed plunging northern, eastern and northeastern India into darkness.

Starved of coal supplies, India's power companies now are looking at importing coal from Indonesia and Australia.

On Friday, opposition lawmakers slammed the government for not pushing ahead with legislation on auctioning procedures for coal fields that has been pending in Parliament since 2006.

"This is a scam that has been taking place under the Prime Minister's nose. We want answers and an explanation from the Prime Minister on the charges made by the CAG," said Rajiv Pratap Rudi, a spokesman of the main opposition Bharatiya Janata Party.

The government countered the arguments saying the auditors' report would be studied by the Parliament's public accounts committee.

V. Narayanasamy, minister in the prime minister's office, said the CAG report was "not the last word."

The government has argued that when the coal fields were allotted, the laws existing then did not allow for an auction. Changing the policy and administrative processes would have delayed the process by several years and would have hurt industry sectors that needed coal.

An earlier draft of the report that had been leaked to the Indian media claimed the government had lost nearly $210 billion from the coal allocations.

The auditor said it had lowered the amount after subtracting the profits that accrued to government-owned companies and accounting only for the profits made by open cast mines. The auditor did not explain the reason for leaving out the profits made by underground mines.

The losses could rival those from the government's botched sale of 2G cellphone spectrum in 2008 that the auditor said cost the nation up to $36 billion in lost revenue.