CAG picks holes in e-auction of coal mines by NDA government

The CAG has picked holes in the e-auction of coal mines by the NDA government last year saying multiple bids by corporate groups through joint ventures or subsidiaries did not give an assurance that potential level of competition was achieved in the first two tranches.

In a report tabled in Parliament today, the Comptroller and Auditor General of India (CAG) said competition may have been restricted in auction of 11 coal blocks on account of multiple bids by corporate groups made through JVs or subsidiaries.

“Audit could not draw an assurance that the potential level of competition was achieved during...bidding of 11 coal mines auctioned in the first two tranches,” it said.

In 11 out of 29 coal mines successfully e-auctioned in first and second tranche, a number of qualified bidders (QBs) in the e-auction stage were from the same company/parent subsidiary company coalition/joint venture (JV), CAG said.

In a scenario where the standard tender document (STD) allowed the participation of JV and simultaneously limited the number of QBs which could participate in the e-action, Audit could not draw an assurance that the potential level of competition was achieved during the stage II bidding of these 11 coal mines auctioned in the first two tranches.

In the third tranche, the Coal Ministry amended the clause of JV participation with the objective of increasing participation, it added.

Reacting on the report, an official source said that as only 6 per cent of the qualified bidders were joint ventures companies and only one successful bidder was a JV company, it is clear that this provision did not restrict competition.

“The Delhi High Court has upheld this provision of the auction. It has stated that the process is neither arbitrary or irrational or designed to favour any particular bidder and has worked out well,” according to the source.

Inconsistencies and inaccuracies in following some of the assumptions and various errors in computing of intrinsic values resulted in under-determination of upfront amounts in 15 blocks, under-determination of floor prices in 6 non-regulated sector coal mine and revised fixed rates in all nine power sector coal mines, CAG said.