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WHY DID VINOD RAI NOT AUDIT HUGE COAL SCAM IN BJP-RULED STATES?

Ashish Khetan

My question to Mr. Vinod Rai, the ex-CAG: “Had you, Mr. Rai as the CAG, audited and quantified the coal scam in the States, many of which were under BJP rule, the fate of NDA and the political narrative of the country would have been very different.”

Please read below my letter to M Rai and his reply:

My letter:

If the screening committee process followed by Union Coal ministry lacked objectivity and transparency, as rightly observed by the CAG earlier and recently by the Supreme Court, the awarding of coal blocks to private companies by the State government run PSUs was both in degree and scale an equally brazen loot of natural resources. The SC in its judgment has observed how State PSUs awarded mining operations to private companies after forming Joint ventures. In a way the State PSUs after being awarded precious coal blocks by the Central Government gave away their mines to private companies and in the garb of JVs bought back their own coal at highly inflated prices. All such JVs have resulted in windfall profits for private companies and loss to State exchequers (Can email you separately a list of such JVs and their concomitant terms and conditions).

“The modus operandi has virtually defeated the legislative policy in the CMN Act and winning and mining of coal mines has resultantly gone in the hands of private companies for commercial use,” says the SC judgment. The apex court has also observed that these private companies chosen by the State PSUs were not even required to set up any plant—sponge iron or power or cement—which otherwise private companies allocated with captive mines were expected to do. It was purely an award of commercial mining given to private companies who then sold coal at inflated prices back to the same State PSU to which the coal originally belonged.

In fact a majority of the 77 coal blocks allocated to state public sector undertakings (PSUs) with a total geological reserve of 22000 million tonnes were in turn given away by the state governments to private companies. The Supreme Court has held all such allotments as illegal.

The question is why you as CAG did not deem it fit to a) order a comprehensive audit of the JVs formed by State PSUs and b) quantify the loss to the exchequer and the windfall profits made by private corporations applying the same audit methodology as CAG did in the case of captive coal blocks? Why did you just stop with the audit of coal blocks awarded through screening committee and failed to take the audit process to the doorsteps of State Govts? The malaise in the coal sector ran much deep as it has now been comprehensively documented by the Supreme Court in its judgment. You as CAG were supposed to be a neutral umpire, the conscience keeper for the whole country.

Why did nation’s conscience keeper didn’t deem it fit to order audit of the coal mines vesting with State PSUs?

As per CAG’s yardstick every one million tonne of coal allotted to a private company through the screening committee process cost the exchequer approximately Rs 29.50 crores. As per this calculation, the total quantum of coal scam under different state governments, most of which were ruled by the BJP, would amounts to more than Rs 4,73,770 crores. In the BJP ruled Chhattisgarh state alone the total size of coal scam would have been 43000 crores had the CAG audited and quantified it on the same lines as it did the captive coal blocks allocated through the screening committee process. Similarly in the case of Madhya Pradesh, again a BJP ruled state, its size would have been more than Rs 21,000 crores. In the Left ruled West Bengal the size again would have been around Rs 50,000 crores. The Jharkhand Govt which has been alternatively ruled by BJP and JMM has given away coal blocks to private parties worth Rs 41000 crores.

“Had you, in fact, stood steadfastly by your beliefs, the fate of UPA-II might have been different. In fact, the fate of the Indian economy itself might have been very different,” is your comment on former PM Manmohan Singh in the context of 2G scam. There is a need now more than ever to ask an equally legitimate and profound question. “Had you, Mr. Rai as the CAG, audited and quantified the coal scam in the States, many of which were under BJP rule, the fate of NDA and the political narrative of the country would have been very different.” Your comments.

Mr Rai’s response:

Dear Ashish,
I have seen your piece.
You are asking the right questions.
You will recall that the audit of the Coal Ministry was done only in 2012. That is the time when we stumbled upon the coal mine allocation process which had started in 1993 but was sought to be changed in 2004. It was then that we learnt that mines which were ostensibly allotted to state PSU’s were taken over by private parties in J V ‘s and exploited for commercial purpose. By the time I left in May 2013, we were barely grappling with the fall out of the Central allocation process and a natural corollary of the Performance audit was a follow on audit in the states. in fact this came to our notice when we saw the auction of six mines in M P by the M P mining corp. You will appreciate that the annual audit Plan is drawn up much in advance of the commencement of the F Y and in that year itself we could not have recalled all the audit teams from what ever they were doing to get into this sector.
There has been an intense discussion that the State Accountants general should do a follow on Performance Audit. I hope this will be done as the suggestion have been made already.
That is the factual position.
As regards the query that you ask—any question can certainly be asked and legitimately so.
Others have imputed motive—–more can be imputed. It is only natural. I have made the observation that I have and should obviously face the brickbats that are thrown at me by similar yardsticks.

Vinod Rai

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