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Coalgate: CAG's Letter To The PM

In response to the Times of India story of March 22, 2012, titled CAG: Govt lost Rs 10.7 lakh crore by not auctioning coal blocks, which stated that the Comptroller and Auditor General (CAG) had estimated in its 110-page draft report that the coal ministry's decision to award 155 coal acreages without competitive bidding had led to "undue benefits" of Rs 10.67 lakh crore to private and public firms, the Prime Minister's Office (PMO) today issued a press release saying:

CAG writes to PM clarifying the coal block issue

With reference to the lead story published in the Times of India today titled “Government lost Rs 10.7 lakh cr by not auctioning coal blocks: CAG”, the Prime Minister has received a letter from the Comptroller and Auditor General of India at 1:30 pm today.

Among other things, the letter clarifies that:

“In the extant case the details being brought out were observations which are under discussion at a very preliminary stage and do not even constitute our pre-final draft and hence are exceedingly misleading. … Pursuant to clarification provided by the Ministry in exit conferences held on 9.02.2012 and 9.03.2012, we have changed our thinking  …. In fact it is not even our case that the unintended benefit to the allocatee is an equivalent loss to the exchequer. The leak of the initial draft causes great embarrassment as the Audit Report is still under preparation. Such leakage causes very deep anguish.”

While the PMO sought to spin the extracts it quoted from the CAG's letter as if a clean chit had been given, the full text of the letter sent by Comptroller and Auditor General Vinod Rai to PM Manmohan Singh on March 22, published by the Times of India, as the paper puts it, is  "at some variance with what the press release had sought to convey"

For example, the extract quoted by the PMO says:

Pursuant to clarification provided by the Ministry in exit conferences held on 9.02.2012 and 9.03.2012, we have changed our thinking  …

whereas the CAG letter only goes on to say that it has changed its thinking:

...on the expression as in many cases the profits have not begun to accrue."

As the TOI points out:

The "expression" in question is "windfall gain". The full sentence makes it clear that the change in thinking is restricted to whether that expression should be used, because profits have not actually accrued in several cases - a point that the TOI report had made.

There appears to be no rethink on CAG's part on whether those allocated coal blocks have gained. This becomes clear from another sentence in the CAG letter that immediately follows the one quoted above. It says, "In fact, it is not even our case that the unintended benefit to the allocatee is an equivalent loss to the exchequer." This sentence acknowledges that the allotees have gained even if the benefits are "unintended".

While CAG says the loss to government may not be equivalent to this gain, it nowhere suggests that there has been no loss to the exchequer. Indeed, the letter does not question any of the figures quoted by TOI from the draft report. [Read more on how the full text of the letter is at variance with the PMO's release at the TOI]

Following is the full text of the letter by the CAG to the PMO today:

Respected Pradhan Mantriji,

The Times of India today carries a lead story titled "Government lost Rs 10.7 lakh cr by not auctioning coal blocks: CAG". The news item goes on to give details of an earlier draft report prepared by the office of the Pr. Director of Commercial Audit - II relating to coal mining. The news item states "The 110 page draft report, a copy of which available with Times of India". This evidently implies that a copy of the draft report or some of its extracts are either in the possession of the reporter or have been seen by him. Naturally leakage of this draft report may attract an allegation that the "CAG leaks". It would console me immensely if the source of the leak is investigated.

As I had stressed earlier in my letter to you on July 5, 2011, I am not in a position to repudiate such an allegation as the leak could have been from my office or from the department to which this draft report was made available on 28.2.2012. I had emphasized that since I have no assurance in this regard, I cannot make any assertion to you. Nevertheless, such leaks of reports which are under preparation to be tabled in the Legislature, or providing replies on such audit queries under RTI which can often be misleading, are issued with which we have been struggling to find a solution.

Since all reports of the CAG, which are prepared under Article 151 of the Constitution, are to be laid in the Parliament/Legislative Assembly, we feel that leaking these reports at the preparation stage itself before they are tabled in the House, may attract breach of privilege of the House. We have been repeatedly orchestrating this view and last took it up with the hon'ble Speaker, Lok Sabha on 24.8.2011 and with Secretary General, Lok Sabha on 1.9.2011 (copies enclosed). However, based on an input provided by the then Secretary General, Lok Sabha to the Central Information Commission, the commission has ruled that RTI queries seeking information on audit memos have to be satisfied. Not being content with this decision of the Central Information Commission, I had personally taken up the issue with the hon'ble Speaker of Lok Sabha. The hon'ble finance minister and the hon'ble minister for parliamentary affairs were also present in a discussion which was held in the chamber of the hon'ble Speaker on August 18, 2011. In the discussion, a view emerged that this could lead to breach of privilege, and hence we decided to contest the decision of the Central Information Commission and filed a writ in the High Court on December 8, 2011. The hon'ble High Court, while disposing the writ has taken cognizance of the legal issues raised in our petition. These are to be determined in an appropriate case, as the impugned order of the Central Information Commission had already been implemented. In the light of the decision of the hon'ble court we are subsequently not making available information pertaining to audit memos under the RTI.

As regards the issue of such leakage of information being a matter of privilege, I had written to the hon'ble law minister on August 3, 2011 seeking his advice on the issue (copy enclosed). I am strongly of the view that the establishment of the CAG must be covered by the RTI. However, I feel that audits are 'work in process' leading to reports being tabled in the Parliament. Therefore, bringing them out in the public domain before being tabled, is a breach of privilege. Unfortunately print and electronic media somehow get possession of such preliminary drafts which are at the initial stages of audit, and flash them. They blatantly announce that copies of such drafts are in their possession. Since these documents are not privileged, we are severely constrained from taking any action against them and face the odium of our sources having leaked these reports.

In the extant case the details being brought out were observations which are under discussion at a very preliminary stage and do not even constitute our pre-final draft and hence are exceedingly misleading. The words "windfall gain" were reproduced in our earlier draft as they were used by the joint secretary/secretary, ministry of coal in their notings on 16.7.2004. Pursuant to clarification provided by the ministry in exit conferences held on 9.2.2012 and 9.3.2012, we have changed our thinking on the expression as in many cases the profits have not even begun to accrue. In fact it is not even our case to the exchequer. The leak of the initial draft causes great embarrassment as the audit report is still under preparation.

Such leakage caused very deep anguish. I am taking the liberty of writing to you to point out that we have repeatedly been writing to the government and the Parliament secretariat. Our letters have not evinced a reply. Earlier my letter to the hon'ble law minister has remained unanswered (copy enclosed). We remain in the dark about the trend of discussions in this regard and continue to face adverse media attention on repeated leakages which are very different from the report that is finally tabled in the House.

I sincerely seek your good offices to assist us in finding a responsible to this predicament.

Warm regards,

Yours sincerely,

(Vinod Rai)


Dr Manmohan Singh,
Hon'ble Prime Minister of India,
South Block,
New Delhi

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