CBIs coal probe throws up more dirt: Firms fudged balance sheets to increase net worth

Written by Rajat Arora | New Delhi | Updated: Sep 6 2012, 09:19am hrs
Fudged balance sheets, insufficient net worth, changes in ownership post allocation of coal blocks and instances of impropriety have emerged in the inquiry initiated by the CBI against the five companies who were allocated six coal blocks in 2008 and 2009.

Despite the grave shortcomings, the screening panel allocated the coal blocks to these firms across four states. On Tuesday, the CBI lodged FIR against AMR Iron and Steel, JAS Infrastructure Capital, JLD Yavatmal Energy, Vini Iron and Steel Udyog and Navbharat Power Ltd. It also raided offices of these companies and their associates in 11 cities.

According to CBI sources, the information provided by these five firms were far from correct. In the FIR, CBI has also named unknown government officials, apart from Congress MP Vijay Darda who allegedly has links with two of the firms.

Sample this: Jharkhand-based Vini Iron and Steel fudged its balance sheet and misrepresented facts to increase its net worth. Three small time firms AMR, JAS and JLD belonging to the same Nagpur-based promoter were falling short of the net worth criteria. In order to meet the net worth, these three firms added the net worth of their short-term MoUs with other companies.

According to CBI officials, in order to meet the eligibility criteria for getting coal blocks, Hyderabad-based Prasad Brothers floated Nav Bharat Power (now owned by Essar Power). It was allocated two coal blocks in Odisha Rampia and dip side Rampia for which 108 applications were received but only two companies were invited for presentations by the screening committee.

The final allotments went to six companies. Nav Bharat Power was one the smallest firm among others that included Reliance Energy, Sterlite Energy, GMR Energy and Mittal Steel. Prasad Brothers. The founders of Nav Bharat held 66.7% of Nav Bharat Power's shareholding in 2008. By March 2009, their share reduced to 0.05% and in 2010, the company was acquired by Essar.

The company's net worth wasn't sufficient to get a captive coal block but it added a bank letter which said the bank was ready to loan their project, a CBI officer said.

The promoters of Nav Bharat Power sold their personal shares to Essar at highly inflated prices, whereas the company shares were sold for a pittance. "5,000 personal shares of the promoters were sold for R50 crore, whereas the company's shares, which were valued at R85 crore, were sold for R12 crore to Essar. The pattern of change in ownership has been suspicious," said a CBI officer.

In the case of Vini Iron & Steel, which was also allocated a coal block, the CBI said the company did not meet the eligibility guidelines laid by the ministry of coal.