CAG to verify values of energy resources to prevent any windfall gain

05 Dec 2021 CW Team

All states and union territories have been directed to present their ‘assets account’ towards their mineral and energy resources for 2020-21 by March 2022 for the auditor to do the cross-verification of physical and monetary values of these assets.

The exercise will include verification of income received by the exchequer through royalty from the extraction of mineral and energy resources, except oil and gas, which are under the Centre, by private or public sector firms.

Natural gas and oil have separate accounting processes. The ‘assets account’ will provide information about the total mineral resources of a state, its annual extraction, the estimated market value and the exact revenue received. A similar study by the auditor will urge each state on ‘windfall gain’ to private entities, if any, on account of lower royalty extracted or pilferages.

The execution of NRA has been undertaken on priority as “a nationally important project”, and the government accounting standards and advisory board established in the CAG with this agenda came out with its first concept paper on NRA in July 2020. Last time, when the CAG had held a similar exercise (like the NRA), including allocations of captive coal blocks, Cabinet ministers of the then UPA dispensation had openly disapproved and questioned the auditor’s intent.

A 2012 CAG report had assessed a ‘windfall gain’ of over Rs 1.8 lakh crore to private and public sector firms that had been allocated captive coal blocks. Ultimately, a Supreme Court-monitored CBI inquiry against irregularities in coal block allocations ended in the cancellation of all allotments made between 2004 and 2011. In its continuing NRA exercise, the federal auditor has released a directive to states via a template of assets account asking them to streamline and improve their internal control mechanism on mining activities that covers the compulsory setting up of automated e-permit system with bar-coding for verification at the check-post. It will allow real-time data sharing with related regulatory officials.

The auditor has additionally asked to enact stringent penal terms against defaulting entities, comprising government departments and officials who fail to comply with these ‘stringent’ rules, not guaranteeing valid e-permits or royalty collection while enabling transportation. The next on the NRA list is estimating for water resources, land and forest and wildlife.

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Assessing ‘windfall gain’, made a commonplace word by the coal scam, is back in currency and anticipated to be a permanent feature with the comptroller and auditor general (CAG) commencing the process of national resources accounting (NRA) that asks for stronger scrutiny and accounting of mineral and energy resources from the states. All states and union territories have been directed to present their ‘assets account’ towards their mineral and energy resources for 2020-21 by March 2022 for the auditor to do the cross-verification of physical and monetary values of these assets. The exercise will include verification of income received by the exchequer through royalty from the extraction of mineral and energy resources, except oil and gas, which are under the Centre, by private or public sector firms. Natural gas and oil have separate accounting processes. The ‘assets account’ will provide information about the total mineral resources of a state, its annual extraction, the estimated market value and the exact revenue received. A similar study by the auditor will urge each state on ‘windfall gain’ to private entities, if any, on account of lower royalty extracted or pilferages. The execution of NRA has been undertaken on priority as “a nationally important project”, and the government accounting standards and advisory board established in the CAG with this agenda came out with its first concept paper on NRA in July 2020. Last time, when the CAG had held a similar exercise (like the NRA), including allocations of captive coal blocks, Cabinet ministers of the then UPA dispensation had openly disapproved and questioned the auditor’s intent. A 2012 CAG report had assessed a ‘windfall gain’ of over Rs 1.8 lakh crore to private and public sector firms that had been allocated captive coal blocks. Ultimately, a Supreme Court-monitored CBI inquiry against irregularities in coal block allocations ended in the cancellation of all allotments made between 2004 and 2011. In its continuing NRA exercise, the federal auditor has released a directive to states via a template of assets account asking them to streamline and improve their internal control mechanism on mining activities that covers the compulsory setting up of automated e-permit system with bar-coding for verification at the check-post. It will allow real-time data sharing with related regulatory officials. The auditor has additionally asked to enact stringent penal terms against defaulting entities, comprising government departments and officials who fail to comply with these ‘stringent’ rules, not guaranteeing valid e-permits or royalty collection while enabling transportation. The next on the NRA list is estimating for water resources, land and forest and wildlife. Image Source