Government under CAG glare again

Published: 12th March 2013 12:16 PM  |   Last Updated: 12th March 2013 12:16 PM   |  A+A-

The State Government is in for more trouble with the Comptroller and Auditor General (CAG) once again questioning the legality of selection of Sainik Mining, a private promoter, as partner for mining Utkal-D coal block in Talcher coalfields.

Pointing out the irregularities committed by the State run Odisha Mining Corporation (OMC) in selection of partner and formation of a joint venture company named Kalinga Coal Mining Pvt Ltd (KCMPL), the CAG said the joint venture agreement with Sainik Mining and Allied Services Limited (SMASL) was in violation of the Coal Mines (Nationalisation) Act, 1973 and the coal block allocation orders issued by the Ministry of Coal.

“Although OMC was allocated the coal block (Utkal-D) for mining as a public sector undertaking, it roped in a private (JV) partner with a majority share ....and entered into an agreement without adhering to the provisions of the Act,” the CAG report on public sector undertakings tabled in the Assembly on Monday said.

The company continued to seek clarification from the Centre without terminating the agreement even after two Lok Sabha members brought to the notice of the Government in August 2007 about the violation of guidelines for allocation of coal block. This was the first instance of showing undue favour to the JV partner having majority stake of 74 per cent in KCMPL, the report said.

Though the Ministry of Mines instructed OMC on April 1, 2009 for modification of the agreement to make the same compliant to the conditions of coal block allocation, the State Government took more than three years to terminate the contract with the JV partner.

OMC executed the joint venture agreement with Sainik Mining on December 29, 2003 for a period of 20 years and the JV company was incorporated on January 30, 2004 with 26 per cent equity held by the State PSU and the remaining share with the private partner.

Sainik Mining submitted its price bid in 2002 when the coal of the Utkal-D block was mandated to be supplied to Odisha Power Generation Corporation, another State owned PSU, on a long term basis. However, the price bid was later changed to enable the JV company to sell coal in open market.

“Due to the changed nature of allotment of the coal block in 2003, commercial aspects of the project underwent change leading to extension of undue favour to Sainik Mining in the form of additional benefit,” the report said.

The CAG further pointed out that the parameters considered for evaluating the bidders for shortlisting was too general. Sainik Mining, which was rechristened as Sainik Transporters Private Limited (STPL), had more experience as a transporter than coal mining.

Besides, basis information including geological date required for evaluation of the project was not available with the company. Tata Steel, one of the three shortlisted bidders, backed out for not having adequate information and data on the coal block.

The coal block could not be explored even after 10 years of allotment defeated the purpose of augmenting coal supply, the report remarked.

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