Report Faults Indian Government’s Handling of Coal Concessions

MUMBAI, India — The Indian government missed out on nearly $34 billion in royalties by selling private companies coal concessions at negotiated prices rather than auctioning them, according to an audit by a government agency released on Friday.

The report, the findings of which some government and corporate officials dispute, is the latest in a series of scathing indictments of the government’s handling of natural resources and economic policy.

Coming just two years after a similar review of telecommunications licensing, this latest audit will most likely put further pressure on the government of Prime Minister Manmohan Singh, which has struggled to defend itself against charges of corruption, mismanagement and fecklessness.

Two years ago, the Comptroller and Auditor General, the agency that issued the coal report, estimated that the government left nearly $40 billion on the table by not auctioning valuable telecom spectrum. The findings of that report and investigations directed by Indian courts have led to the arrest of senior government officials and corporate executives who are now awaiting trial.

In its latest report, the auditor said officials awarded 142 coal concessions since 2004 on favorable terms to private and state-owned firms without bidding. That process cost the India 1.85 trillion rupees ($33.7 billion), the report estimated. The coal was meant to be used by companies like Reliance Power, Tata Power and Adani Power to fuel new power plants to meet India’s fast-growing need for electricity.

“The allocation lacked transparency and objectivity,” the report said.

A shortage of coal, the main fuel for India’s power plants, is a big reason India has been unable to provide enough electricity to businesses and consumers. Last month, a widening gap between supply and demand for power led to widespread blackouts that cut power off to about half the country.

The government’s critics seized on the coal report, along with two other audits released on Friday about the privatization of the New Delhi airport and the awarding of power plant contracts as further evidence that the government led by Mr. Singh and his Indian National Congress Party had lost its way.

“The report represents a mix of the policy paralysis, inefficiency being used for a corrupt and collateral motive,” the opposition Bharatiya Janata Party said in a statement.

India’s coal minister, Sriprakash Jaiswal, disputed the formula used by the auditor to estimate the hypothetical loss and said the government had been “transparent” in its coal policies. And executives in the power industry said that the auditor’s report was flawed because it did not take into account that almost all the coal had to be used to produce power that was then sold at government-determined rates to state utilities.

Harry Dhaul, the director general of the Independent Power Producers Association of India, questioned whether a swindle could even exist, given the heavy regulation of the power sector.

Power executives also said that most of the losses were largely theoretical, because companies had been able to start mining coal from just 28 of the 142 leases. The rest of the coal remains in the ground because state and federal regulators have not yet granted them environmental approvals they need to start mining.

The auditor’s office acknowledged those delays and said the government must streamline the approval process so companies can start work faster.

Though rich in coal reserves, India has struggled to exploit the fuel because of its heavy reliance on one company, the state-owned monopoly Coal India. In recent years, policy makers tried to speed up extraction of coal by giving “captive mines” to power plant operators, but the effort has been slow to take off.

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