R-Power, Adani Power decline post CAG report

Reliance Power fell more around 6% after the Comptroller and Auditor General (CAG) releasing a report stating that the company unduly benefited from a government decision allowing the power producer to use surplus coal from its captive block for another project it was not meant for.

However, responding to the CAG report, Reliance Power said in a filing with the BSE that the company has no role in the coal reserves allotment to Sasan UMPP.

Meanwhile, along with R-Power, The CAG in its report named 25 companies, including Essar Power , Hindalco , Tata Steel, Tata Power and Jindal Steel and Power, which got the blocks in various states on nomination basis instead of competitive bidding.

Hence even Adani Power declined 2.5% to Rs 42.40, Tata Power too slipped 3.2% to Rs 97.80 and Hindalco too was down 2.5% to Rs 113.95.

The CAG estimated a loss of Rs 1.86 lakh crore to the exchequer on allocation of the blocks. However, the initial draft had estimated the losses at close to Rs 10.7 lakh crore.

The auditing body said it has arrived at the estimates based on the average cost of production and average sale price of open cast mines of Coal India in the year 2010-11.

"A part of this financial gain could have accrued to the national exchequer by operationalising the decision taken years earlier to introduce competitive bidding for allocation of coal blocks," CAG said.

The body also said it is "of strong opinion that there is a need for strict regulatory and monitoring mechanism to ensure that benefit of cheaper coal is passed on consumers".

The concept of allocation of captive coal blocks through competitive bidding was announced in 2004. However, government is yet to finalise the modus operandi of competitive bidding.