Companies & Sectors
Coal India should develop and expand in India rather than venture outside!

Instead of chasing the rainbow and coal abroad, CIL would do well to persuade the environment ministry for expeditious clearance of a few out of the 45 pending cases and endeavour to comply with as many conditions that have hindered the progress

As already reported in the press, when the Comptroller & Auditor General of India (CAG) presents his report to the PAC (Public Accounts Committee) and to the Parliament, he
is most likely to recommend that the entire coal block allocation be scrapped, declared null and void, except for the solitary unit that went truthfully to operate the mines. In fact, chances are that he may go one step further and suggest the relevant sections of the law and point out the loopholes under which such a move would be possible without further hassle or legal complications!
The opposition will, then, wholeheartedly support this move and the UPA will have no alternative but to concede to this legitimate demand.
Also, as more and more details of the allocation data emerge, there is no doubt that for a great number of unexplained reasons, no action was initiated or taken when the allottees did not commence production in 36 to 48 months time. Everyone concerned has more than one tangible excuse that they are still “awaiting clearances” from the state and the MOEF (ministry of environment and forests) so that they can proceed with the ‘spade’ work.
In the meanwhile, Coal India (CIL), the world’s largest coal producer by virtue of being a government undertaking has other plans on the anvil, and that of exploiting the overseas assets!
In a separate report published in the Mint, CIL chairman, Narasing Rao has reiterated its plans to acquire mining assets in South Africa and Mozambique. After all, CIL is flush with funds and has a large cash reserve.
This move may temporarily distract our attention from the drama of Coalgate in progress, but the fact remains that CIL’s earlier attempts, a decade ago, did not succeed, comes to our mind.
Generally, red tapism, bureaucratic controls and other stumbling blocks have always come in the way of most government undertakings. They do not have the enterprising skill and spirit of private firms; and by the time someone really succeeds in a job like this, it will be the most inappropriate time for his transfer for another posting.
Under the present circumstances what should Coal India really do?
In an earlier report, (Moneylife issue dated 17th August: we had stated that Coal India itself was awaiting various clearances, both from the state and the MOEF for it to work on. Some 158 of their applications were in process, at various stages, out of which 133 were pending at the state levels and 45 with the MOEF.
Therefore, instead of chasing the rainbow and the pot of gold, err coal abroad, CIL will do well to persuade the MOEF for expeditious clearance of a few out of the 45 pending cases and endeavour to comply with as many conditions that have hindered the progress. Surely, it is not a herculean task for one PSU to convince the MOEF of its ability and willingness to comply with the stipulated terms, but seek at least interim clearance to start the ‘spade’ work. Even then, it would be at least another two to three years before CIL can start mining coal, assuming of course, it does the job itself or even give it to a qualified contractor with proven track record.
For the time being, Coal India should divert its attention and energy to develop indigenous resources, obtain the best mining equipment, plan dedicated corridors, use its cash reserve to finance such an operation, instead of scouting for overseas mines.

CIL must consolidate its position at home first. Or be smart enough to sign up a lease agreement with a clear option to buy the mines within a stipulated period. This way, it would know the quality of coal mined in terms of calorific value, experience the local conditions and get exposed to onward transmission to India.

(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce and was associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US. He can be contacted at [email protected].)


NDTV Vs WPP: Defamation suit against Sir Martin Sorrel by NDTV's law firm

Sabharwal & Finkel, which is representing NDTV, has filed a defamation suit against WPP chief Sir Martin Sorrel for making false, defamatory and malicious statements about the law firm

The war over the quality of television audience measurement (TAM) ratings is getting nastier by the day. Ever since New Delhi Television (NDTV) filed a $1.3 billion lawsuit against TAM and several companies of the WPP Group Plc at the New York Supreme Court over the quality of their ratings, the pitch has escalated. Now, Sabharwal & Finkel (S&F) LLC, the law firm representing NDTV has filed a defamation suit against Sir Martin Sorrel, the chief of WPP, for allegedly making false, defamatory and malicious statements relating with S&F in context with the NDTV suit.


Here is the complaint filed by S&F at the Supreme Court of the State of New York...


Last week, the mighty WPP group hit back hard at NDTV for its $1.3billion lawsuit against incorrect TAM ratings, with chairman Sir Martin Sorrel leading from the front. The crux of NDTV’s lawsuit is the allegation that TAM ratings (controlled by WPP), which are the main basis of deciding advertising spend in India today, can be influenced for a price.


In an interview with the Mint on 25th August, Sir Martin savaged NDTV, saying a “two-lawyer firm, ‘which’ specializes in restaurant law” had called WPP and “asked if we would discuss a settlement. I said there is no question of settlement. This whole thing is mischievous, designed to elicit some financial response from us”. He also told Mint that “they (NDTV) are issuing illegitimate proceedings in the US with lawyers working on a contingency basis, where they do not get a fee, but a percentage of the settlement. That is why they rang up”. Expectedly (to us) Sir Martin attacked NDTV’s financial performance by pointing out that its “market cap has fallen from $800 million to $60 million”. He ended by saying that NDTV’s PR campaign had hurt the reputation of WPP and TAM and that is why WPP was considering a defamation suit.


Until the hearings begin at the New York court, it will be an interesting battle of strategy and maybe even dirty tricks—after all, there is a lot riding on the jurisdiction issue and while courts are not supposed to take cognizance of media reports, everybody knows that it does play a significant role.


CAG says it has right to examine government policies

Being effective does not mean hiding behind technicalities and overlooking something that was clearly patently opaque exercise of discretionary power, say sources from CAG

New Delhi: Rebutting the criticism by Government and the Congress party on coal blocks allocation, the Comptroller and Auditor General (CAG) on Wednesday said it has the mandate to examine and scrutinise public policies, reports PTI.
"...policies of a government do not emerge from vacuum but a culmination of a due diligence process that involves faithful examination and analysis of empirical evidence on the ground, higher values of governance, feasibility of implementation, materiality of financial costs and perceivable benefits based on current and reasonably predictable facts", GAG sources said.
As there is a close relationship between developments of public policy and its implementability and financial implications, the sources said, "it is unrealistic to expect that...C&AG's audit findings will not cast any shadow on the policy itself. Let us be real".
They were responding to criticism of the official auditor by the government and also an article written by Congress spokesperson Manish Tiwari questioning CAG's mandate to examine government policies.
CAG's findings that allocation of 57 coal blocks resulted in a loss of Rs1.86 lakh crore to the exchequer evoked sharp reaction from the government and Congress party. Parliament has also seen turbulence over the report.
Prime Minister Manmohan Singh had questioned the CAG findings on coal blocks allocation describing them as "disputable and flawed".
"The policy of allocation of coal blocks to private parties, which the CAG has criticised, was not not a new policy introduced by the UPA. The policy has existed since 1993 and previous government also allocated coal blocks in precisely the manner that the CAG has now criticised," he had said.
In a 32-point rebuttal of the CAG findings on the coal blocks allocations Singh said "the observations of the CAG are clearly disputable.
Tiwari in an article in The Indian Express on 28th August had said, "...the CAG does not have the Constitutional or legal mandate to make its own policy prescriptions and then utilise them to compute notional or even mythical loss or gain. Even when it chooses to do so, it ends up getting is grievously wrong. Headline-hunting is a volatile vocation -- perhaps it is time to stop this parody." 
CAG sources said sections 16 and 17 of the CAG's (Duties, Powers and Conditions of Service) Act 1971, uses expressions like "effective check" and "stock" with regard to the exercise of function by the official auditor.
Being effective, they said, "does not mean hiding behind technicalities and overlooking something that was clearly patently opaque exercise of discretionary power...something the honourable President of Indian National Congress (Sonia Gandhi) frowned upon last year".
They said that coal blocks constitute "stock" in the custody of Coal Ministry, "audit of its accounts certainly includes how such stock was disposed off and whether liquefaction of such stock has been done with due diligence..." 
Referring to the 13 June 2006 Office Memorandum (OM) of Finance Ministry, which Tiwari wanted to be quashed, the CAG official said, "the OM is a mere clarification. It neither enhances nor impairs the powers granted to the CAG as per the Act, to decide on the scope and extent of audit." 
The OM, they added, only gave formal recognition to decades old audit practice at a time when CAG was pleading for amendments to the C&AG (DPC) Act to spell out definition of audit in more clear terms.




5 years ago

The commendable work being done by CAG, is not the brain-wave of Vinod Rai or his predecessor who have sharpened the tools of audit to make them effective in the present context.
Performance audit is a concept introduced as part of commercial audit carried out by the then Indian Audit and Accounts Department in the late sixties. The purpose was to go beyond mere checking of accounts and ensuring that each item of expenditure was backed by a ‘voucher’ and find out whether the expenditure from public funds actually served the purpose envisaged when the outlay of expenditure was planned.
In the years that followed, the scope of audit has expanded along with the growth in public expenditure, multiplicity of sectors and ever-growing size of projects and extending geographies. As the funding comes ultimately from the taxpayer, the difference between public and private sectors is also getting narrowed down. Suffice to say, when CAG comments on nation’s resources ‘sold out’ to private sector, traditional accountants get a doubt about his jurisdiction.
India’s resources including financial resources deserve a more dignified treatment. If government or political leadership feel that CAG or for that matter any of the regulatory authorities should not comment on the performance part of policy decisions by ministries, it is time the country thought about having a separate authority to do the job. GOI should set up a ‘Performance Audit Authority’ which should have powers and competence to act as a watchdog to ensure that public expenditure is insulated from pilferages and leakages of the kind that are coming out every day. The present efforts of CAG, commendable though they are, do not result in online corrective measures which alone can minimize plundering of resources. Healthcare, not reasons for death through post-mortem, is the need of the hour for the Indian Economy as a whole.

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