CAG castigates Odisha govt for irregularities in coal block deal
By Ratikant Mohanty
Bhubaneswar, March 12: The Comptroller and Auditor General of India has pulled up of the state-owned Odisha Mining Corporation (OMC) for irregularities in selection of partner and formation of a joint venture company with Sainik Mining and Allied Services Limited (SMASL) by the public sector undertaking violating the Coal Mines (Nationalization) Act, 1973 and coal block allocation orders.
In fact, following severe criticism by the opposition BJP and Congress on the deal, the Naveen Patnaik government in September 30th last year had scrapped the JV with SMASL.
In July, 2001, the OMC had obtained allocation of Utkal-D coal block in Talcher Coalfields from the Union ministry of coal (MoC), for supply of coal to Odisha Power Generation Corporation Limited (OPGC).
Since, coal mining business was then a fairly capital intensive, - OMC subsequently wanted to develop the coal block through joint venture ((JV) by offering 51 per cent equity to a private promoter and to retain equity of 49 per cent, maximum of which is to be obtained as free equity from the private promoter.
Accordingly, the PSU in January, 2002 invited Expression of Interest (EoI) for JV. Out of 21 bids received, three were shortlisted. Two part tender documents were sent (May 2002) to the shortlisted bidders for submission of technical and financial/commercial bids.
On evaluation of the bids, the OMC selected Sainik Transporters Private Limited, later changed to Sainik Mining and Allied Services Limited (SMASL), as the preferred bidder for the JV partner.
“On September 5, 2002, the board of directors (BoD) decided to restrict its equity to 26 per cent only for reasons not on record and on September 25, 2002 issued Letter of Intent to SMASL,” the CAG report tabled in the Assembly on Monday evening said.
“Although OMC was allocated with the coal block for mining as a Public Sector Undertaking (PSU), it roped in a private JV company with a majority share and continued negotiating with them and finally entered into an agreement without adhering to the provisions of the Act,” The CAG said.
The Union ministry of coal (MoC) on September 3, 2009 had issued a show cause notice for delay in implementation of the project in response to which the Company cited) various reasons including non receipt of clarification from MoC regarding shareholding pattern of the JV Company.
The MoC, however, on July 9, 2010 asked the Company to suitably modify the agreement with the JV and raise the company’s shareholding in the JV Company to not less than 51 per cent in order to make the JV a government owned company.
The CAG further added that there was no attempt to terminate the contract although two MPs had made representations in August 2007 wherein it was brought to the notice that conditions for allocation of coal blocks were being violated.
“Only due to other developments, the company was forced to terminate the JV,” the CAG observed.
On September 22, 2012, - senior BJP leader Bijoy Mohapatra had raised the issue of the irregularities in the formation of the JV and questioned the wisdom of the OMC to allow majority stake to a private firm. It became a majority issue then. Eight days after on September 30, the OMC scrapped the JV with SMAS.
The JV Company envisaged net revenue earning of Rs 840.52 crore inclusive of facilitation fee of Rs 626 crore up to a period of 20 years with a production of two million tons per annum.
Source: www.indusvalleytimes.com
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