In three reports released Friday, India's comptroller and auditor general has concluded that government policies for coal concessions, large power projects and the privatization of the New Delhi airport were riddled with irregularities. The audits were submitted to Parliament on Thursday and made public a day later. The reports will likely make it more difficult for the governing coalition led by the Congress party to restore its badly damaged credibility. Findings in the audits will provide further ammunition to opposition parties, civil society groups and critics in the media who have argued that the government has lost its way, pointing to scandals over the sale of telecom licenses and to the widely criticized oversight of the Commonwealth Games in 2010.
The findings of the latest audit reports are summarized below.
Coal
India has one of the world's largest reserves of coal, at an estimated 285 ,863 million tons. To meet rising demand for electricity, the government of India decided to allocate coal blocks to private developers. The report said: “With the declared objective of Power to All by 2012, the government allocated 194 coal blocks with aggregate geological reserves of 44,440 million tons to government and private parties as of 31 March, 2011. The procedure followed for allocation of coal blocks to captive consumers lacked transparency as the allotment of coal blocks to prospective captive consumers were made merely on the basis of recommendation from state government and other administrative ministries without ensuring transparency and objectivity.â€
The report estimated that the policies will result in a net gain to private developers, and a loss to the Indian treasury, of 1.86 trillion rupees, or $33.4 billion. The report said it would have made much more sense for the government to bid out the coal concessions.
Power Projects
In 2005, the government decided to develop several “ultra-mega†power projects with a projected capacity of around 4,000 megawatts at a cost of up to 200 billion rupees each. The government identified 16 such projects, and private companies were invited to bid on six of them between 2006 and 2012; four projects were awarded. Three of them were won by Reliance Power. The audit report found that the government granted more land than needed for two of the Reliance projects. After the bidding was complete, the developer was given permission to use surplus coal from one project to feed its other projects. The decision resulted in undue financial gain for the firm. Reliance Power has refuted the charges and said it did nothing wrong, adding that the policy decisions in its favor were upheld by a group of ministers and by a court.
Indira Gandhi International Airport, New Delhi
Facing a big bill for the renovation and development of the airport in New Delhi, the government decided to establish a joint venture with a private company. Delhi International Airport Private Limited was formed and 74 percent of its shares were sold to the infrastructure company GMR. The joint venture took over the Delhi airport in May 2006. The audit report found that the venture received a lengthy contract to manage the airport for 30 years, which it can unilaterally extend for another 30 years on identical terms and conditions.
The joint venture was also given 239.95 acres of land for a nominal sum. Auditors say the land is valued at 240 billion rupees. After bidding for the airport stake was complete, the joint venture was also allowed to charge passengers a development fee to finance its renovation of the airport. The audit report concluded that the government and the Airports Authority of India “always ruled in favor of the operators and against the interest of the government†in every financial matter that came up afte r the agreement was signed.
In a statement issued Friday, the joint venture denied the charges, arguing that it had not received “undue benefits from the government before, during or after the bidding process.†It added that the privatization was “based on a transparent, international, competitive bidding†that was later upheld by the Supreme Court.
