Prosecute Vinod Rai for causing irreparable damage to Indian economy with half-truths

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‘Pliable Media and Almost a Dishonest CAG’ Killed a Thriving National Economy on The Bogey of Rs 1.86 L Cr Presumptive Loss Theory of Private Coal Block Allocation.’

Vinod Rai

The Indian government last week approved PSU bank recapitalisation plan of Rs 2.11 lakh crore, which included Rs 1.35 lakh crore via bank recap bonds and Rs 76,000 crore from budgetary support and market loans. This was after it was revealed that non-performing assets of banks have increased from Rs 2.75 lakh crore in March 2015 to Rs 7.33 crore as on June 2017.

As rightly highlighted by Kapil Sibal in his article for The Indian Express, the auction of coal blocks and its consequences significantly contributed to the NPAs. The banks would have been in a far more healthier shape had a man called Vinod Rai not ruined the economy through his half-truths or, let’s say, lies on coal blocks allocations.

Perhaps now is the time to revisit the subject. The cancellation of coal blocks resulted in closure of mines rendering lakhs of workers jobless. The trickle-down effect of killing the operational coal mines directly impacted the growth, employment opportunities and investments not only in coal but also in power, steel, cement, fertiliser and infrastructure sectors. The slump in all these sectors have contributed to the rise in NPAs of banks.

Let’s make it even simpler. What was highlighted as a presumptive loss of Rs 1.86 lakh crore because of the allegedly flawed process of coal block allocations, has, in effect, caused a bigger loss to the Indian economy.

Consider this;

  • The private coal blocks in their entire lifetime would have earned a profit of Rs 1.86 lakh crore for private companies and generated an employment of 76.81 lakh people man-year contributing to the national wealth creation.
  • The government would have earned Rs 3.98 lakh crore by way of taxes, cess and levies if those private coal block were allowed to be operational.
  • Citizens would have earned Rs 3.25 lakh crore salary and remuneration. They would have paid 30% of Income Tax amounting to Rs 1 Lac Crore to the Govt. They would have then spent that money thereby significantly contributing to the economy. The entire gainful economic activity was stopped when coal blocks were cancelled.
  • Direct loss to bankers worth Rs 94,237.5 crore in the form of coal extraction process. Banks were set to earn Rs 150 per tonne through the coal extraction process. This is just the loss from the mining sector. Railways, trucking and machine manufacturing also too have suffered immensely.
  • Downstream loss of banking sector in investments in Steel, Power, Cement, Fertiliser and Infrastructure projects is huge. Rising NPA of Rs 8 lakh crore is significant impact of strangulating private investments in coal, steel and power sectors.
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India has over 285 billion tonnes of coal reserve, which, if mined at the current rate of 500 million tonnes per year, will last for over 570 years. Coal is the most abundant of all-natural resources and cannot be regarded as scarce. If coal is not utilised to fuel our economy in the next few decades, it will be useless as an energy source due to its impact on environment and rise of alternative renewable energy options in future.

The Coal India Limited had its own limitations in adding the production capacity and, therefore, private companies were allocated project based blocks to enhance coal production and produce steel and power in the process. These coal blocks were those which CIL did not have any plans or capacity to mine in the near future. A series of lies and propaganda with political opportunism was launched to destroy the national economy by striking at its core- The Coal Sector.

Prosecute Vinod Rai

Constitutionally, Vinod Rai as the CAG was duty-bound to place the complete truth and evaluate the entire economic activity encompassing the private coal block allocation and mining. By presenting the half-truth in his CAG Report, he is essentially guilty of misleading the nation and destroying a thriving economy. A propaganda of presumptive loss of Rs 1.86 lakh crore was willingly lapped up by a pliable media and the hawkish opposition to taint the then UPA government.

Even the Supreme Court was misled into cancelling the entire allocation of coal blocks awarded since 1993 terming them as illegal acts of central governments. Thus, the giant wheel of prosperity which had ensured India’s growth even through the severe global economic depression of 2008, was brought to a grinding halt.

The domino effect of destroying investor’s confidence in coal and power industry can now be seen in all industrial sectors such as growing banking crisis of NPA to the tune of almost Rs 8 lakh crore, closure of many thermal power plants, crisis in steel and cement industry, stressed food and agriculture, rising unemployment, collapsing railways and housing sector to name a few.

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Coal is the fuel for our national economy. Today, the impact is being felt by all bankers as growing NPA (Non-Performing Assets) threatens the very existence of the banking system of India. Can banks absorb Rs 8 lakh crore loss as industries are crumbling one after the other? The recent announcement by the Finance Minister Arun Jaitley to bail out banks with taxpayers’ money to help them tide over the NPA crisis adversely affects each and every citizen.

And we are in this mess because of the lies propagated by Rai. No individual man in the history of independent India has caused more harm to the Indian economy than what Rai did through his utterly flawed CAG report. He ought to be tried in the court of law.

The Summary and Flawed Logic of CAG Report

Consider this;

The government gave away 6282.5 million tonnes of coal through coal block allocation instead of following a bidding process allegedly causing a net gain of Rs 1.86 lakh crore for private companies. The CAG first calculated the average sale price for all grades of coal sold by the Coal India in 2010-2011. This came to Rs 1,028.42 per tonne. It then calculated the average cost of production for all grades of coal for the same period. This came at Rs 583.01 per tonne. Aside from this, there was a financing cost of Rs 150 per tonne which was taken into account, as advised by the ministry of coal. Hence a benefit of Rs 295.41 per tonne of coal was arrived at (Rs1,028.42 – Rs583.01 – Rs150). The estimated windfall gain was thus estimated to be at Rs 1,85,591.33 crore (Rs295.41 x 6282.5 million tonne), or around Rs1.86 lakh crore, by the CAG which was THE PRESUMPTIVE LOSS TO THE NATION.

However, a closer analysis of the Annual Report of Coal India Limited 2010-11 which formed the basis of the CAG Report will unmask the half-truth or lie that misled the nation.

Figures from CIL Annual Report Year 2010-11 shows that 435.84 Million Tonnes of Coal was sold for a Gross Sale Revenue of INR 60240.90 Cr and earned a net profit after taxes of INR 10867.36 Cr for the CIL. This profit for the year 2010-11 was arbitrarily taken as the basis by the CAG for arriving at a windfall gain of Rs 1.86 Lac Cr to private companies.

CAG’s logic was simple but flawed as we shall see later. “If CIL could extract 435.84 million tonnes of coal to earn a net profit of Rs 10867.36 Cr, then private companies would also earn profit in a similar proportion for each tonne of coal”, CAG reasoned.

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By pegging the Windfall Gain at Rs 1.86 Lac Crore with CIL profitability as the basis, it can be mathematically concluded that private coal business as allocated was 17.115 times bigger than the CIL business for the year 2010-11; calculated by dividing the windfall gain to private companies by Net Profit of CIL in the year 2010-11 (186000 / 10867.36).

CAG concluded that if the CIL earned a profit of Rs 10867.36 crore in 2010-11 then a coal block which is 17.115 times bigger would earn a windfall profit of Rs 1.86 Lac Cr. It’s a flawed logic on many counts but for illustration, let’s accept it as gospel truth.

Vinod Rai conveniently avoided to calculate and tell the nation the entire spectrum of government and citizen earning which would have been created in the process of mining 6282.5 million tonnes of coal by private companies. His focus on earning of private companies was so narrow that he missed out on the overall gain to the entire economy and the nation.

The National Fraud is being tabulated to assess the damage caused by CAG’s Lie:

 

CAG killed a very huge economic vertical by bogus reporting, which was used to further mislead the nation and the Supreme Court. The nation is paying the price for Rs 10 lakh crore loss to the nation as a result of cancellation of private coal block allocation.

Capt Ehsan Khalid is Retired Indian Air Force Officer with a keen interest in natural resources and its utilisation for national growth. He has been associated as consultant to the coal industry and its ancillary activities for almost a decade.

4 COMMENTS

  1. its obvious that Vinod Rai and Hanna Hazre may be knowingly or inadvertently killed the Indian economy with their catcheble antics in through the Indian media.

  2. Yes Mr Janta ka reporter. It seems we have lost all honesty and integrity ourself. In persue of growth and GDP we will also claim honest facts which were right as wrong since as individual s we are only bothered towards growth.

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