Coal block auction passes CAG loss estimates, to wipe out fiscal deficit of Indian states

New Delhi,Shubhashish(dna): “As per our estimates, total payment to the states in next 30 years would be more than Rs 4 lakh crore for 204 blocks that have been cancelled by the Supreme Court. In addition to this, an equal amount will also flow to the states treasury by way of royalty.”


Representational image File Photo dna Research & Archives

Between coal block and spectrum auction, the Indian government has raised over Rs 3 lakh crore already. This is more than the estimate given by Comptroller and Auditor General of India (CAG).

Moreover, the Supreme Court had canceled 204 coal blocks and auctioning only 32 so far have garnered Rs 2 lakh crore for the government. The rest has come in by way of spectrum sale. CAG had estimated the loss of Rs 1.86 crore from coal block allocations.

Piyush Goyal, Coal Minister of India, yesterday said that the coal producing states like Odisha, Jharkhand, Madhya Pradesh and Chhatatisgarh are likely to earn lakhs of crore of additional revenue from these coal block auctions.

Goyal said that Odisha, Jharkhand, West Bengal and Chhattishgarh would be the largest beneficiaries of the “honest and transparent e-auction”.

In five days of the second leg of auction so far, mines have been mostly sold in eastern states to firms like Adani , Aditya Birla’s Hindalco Industries, Sajjan Jindal-promoted JSW and Jindal Steel.

With the acceptance of the 14th finance commission report which talks about cooperative federalism and provides 42% of the total taxes of the Centre to state governments, wiping out fiscal deficit from balance-sheets of Indian states has never been easier.

In a report dated January 5, 2015, State Bank of India’s EcoWrap said, “As per our estimates, total payment to the states in next 30 years would be more than Rs 4 lakh crore for 204 blocks that have been cancelled by the Supreme Court. In addition to this, an equal amount will also flow to the states treasury by way of royalty.”

The bank said that the estimates and amount may go “well beyond” this with an increase in coal extraction and auction price.

With the bumper Rs 2 lakh crore generated already from just 32 mines out of 204, it looks likely that states will get much more than Rs 4 lakh crore as estimated by SBI.

As per the auction process, the money raised from these auctions will go entirely to the state government where the mines are located. “State governments will get the full share of the revenue generated through e-auctions,” SBI noted.

The auction so far:
On Monday alone, two mines — Utkal C in Odisha and Lohari in Jharkhand fetched over Rs 11,000 crore.

The total number of mines auctioned so far is 32, with 19 mines in the first phase of the auction that swelled the government’s treasury by Rs 1 lakh crore.

The Coal Minister also said that the auction will help in lowering power costs for consumers as power fuel cost would come down by Rs 96,971 crores.