Callous, careless, and casual approach”, are the observations of the apex court against executive while pronouncing a historic judgment on one of the cases involving coal blocks allocation. The Three judges Bench of the Supreme court headed by Chief Justice of India (CJI) Justice NV Ramana imposed a Rs. 1 lakh fine on the central government for unlawfully levying penalties on BLA Industries Private Limited after wrongly including the company in the list of illegal allottees. The Bench, which also included Justices Krishna Murari and Hima Kohli, who authored the Judgment, termed the executive’s error as ‘callous, careless and casual.’ The case was argued by Adv. Abhimanyu Bhandari and Adv. Ayush Agarwal for BLA Industries.
The executive’s wrong decision led to the cancellation of a coal mining lease that was lawfully granted to BLA Industries. The Apex court observed that BLA Industries had lawfully followed the correct procedures by approaching the state government first seeking to obtain a mining lease. BLA Industries, the court said, was granted by the Mines and Mineral (Development and Regulation) Act, 1957 (MMDR Act). The central government had wrongly included BLA Industries in the list of 46 coal blocks submitted before the top court. Taking a dim view of the executive’s error, the Supreme Court said, “As a result of this callous, careless and casual approach of the respondent no. 1 – UOI, the present petitioner had to suffer loss and ignominy. Therefore, litigation costs quantified at ₹1 lakh shall be paid by respondent No.1 – UOI to the petitioner within four weeks.” The inclusion of BLA Industries in the list of 46 coal blocks resulted in the cancellation of the company’s mining lease by the Supreme Court in 2014.
The government had filed a contempt petition against BLA Industries for the non-payment of the levy. The Supreme Court dismissed the contempt petition calling it ‘meritless.’
Now imagine the pain of the company suffering losses not only financially but also the irreparable image dent caused by allegations levelled against them. And, BLA is not the only company, there are many more, look at the case of Jindal Steel and Power (JSPL). As per the Affidavit filed by Union on India in Supreme court, Union of India mentioned that a levy of Rs. 295 per tonne should be imposed on the companies for coal extracted by them. In the affidavit, it was wrongly mentioned that a levy of 295 per tonne on the coal extracted was suggested by the CAG report but in reality, the CAG report does not have any such suggestion to Anyone.
The wrong Affidavit was Misleading, resulting in Jindal Steel paying approximately 3300 crores as a penalty. Is this not an eye-opener?
Remember the observations made by the former CAG Vinod Rai. In 2011 – the Government sought Audit Reports by CAG on two key issues: 1) Allocation of Coal Blocks and 2) Augmentation of Coal Production. Vinod Rai, the then CAG – reported the findings and recommendations on the above issues to the Government vide the “Report of the Comptroller and Auditor General of India on Allocation of Coal Blocks and Augmentation of Coal Production” which was duly presented to the Lok Sabha by Prime Minister – Mr. Manmohan Singh. The CAG in its report supported the Parekh Committee’s recommendation for competitive bidding for the allocation of coal blocks. It alongside also surfaced observations and recommendations – a few of which may perhaps be too far-fetched and based on erroneous assumptions. There were evident anomalies in the CAG Report which were further misconstrued, misrepresented, and extrapolated by various stakeholder groups. However, it is important to duly surface the canard of assumptions and errors, which prevail as myths and have clouded the general perception of people. At the same time – also annihilate all misconceptions about the CAG report in the public domain.
ERRONEOUS ASSUMPTIONS MADE BY CAG
Excerpt: “Audit has estimated financial gains to the tune of Rs. 1.86 lakh crore likely to accrue to private coal block allottees (based on the average cost of production and an average sale price of open cast mines of CIL in the year 2010-11).” CAG made highly optimistic assumptions to arrive at the calculation of Rs. 1.86 Lakh Crore, which was based on unrealistic mine reserves and inflated margins. (6.2 Billion Reserves X Rs. 295 per Tonne = Rs. 1.86 Lakh crore) 1) 6.2 Billion Reserves It was assumed that 100% of the estimated reserves of the 218 captive coal blocks over 30 years would be mined. There is in contradiction to its observations and recommendations which took cognizance of the hardships and complexities of developing a Coal Mine. This was duly ascertained by the fact that out of 218 blocks only 40 blocks were operational. It is rather unfortunate that the CAG – a premier audit body of the country could have made calculations based on such notional and inappropriate factors. It is noteworthy to mention in reality – only 300 Mn tonnes of coal have been mined from the captive coal blocks over 20 years as juxtaposed to 6.2 Bn as assumed by CAG. 2) Rs. 295 per Tonne The calculation methodology is derived based on the difference between the average price realization of CIL and the average cost of CIL during the year 2010-11. Rs. / tonne a) Average sale price of all grades of CIL (Open Cast) mines for 2010-11 1028 b) Average Cost price of all grades of CIL (Open Cast) mines for 2010-11 583 c) Financing Cost 150 d) Therefore, average cost = (b + c) i.e. (583 + 150) 733 NET GAIN = (a-d) i.e. (1028 – 733) 295 It is difficult to fathom, how CAG could have erroneously benchmarked the margin price of low-grade coal (F & G so allocated to Private Producers) with that of high-grade coal of CIL mines to arrive at the Mythical figure of Rs. 295/tonne and that too derived from one Financial Year (2010-11) alone. Therefore, the reference figures were not authentic, since they were regardless of price, grade, and cost of production. a) This gross error is evident from the reported facts of CIL’s Annual Reports between the period 1993 – 2010 – which show that their margins have been significantly lower than Rs 295/tonne. b) Moreover, it is worth reckoning that comparative prices of low-grade coal that was mined by the private sector have ranged between Rs. 183 and Rs. 570 over the last 20 years. Thus 295/tonne – was not a truly representative figure and the basic premises of CAG’s calculations were incorrect. In the famous words of Sir Abraham Lincoln: ‘Truth is generally the best vindication against slander. Let’s hope for justice, it may be delayed but not denied. There are many companies who paid an additional levy of 295 Rs per Tonne and these companies are Punjab state electricity board, West Bengal State electricity board, Calcutta electricity supply corporation, and Hindalco respectively.