New Delhi: The Central Bureau of Investigation (CBI) is probing alleged irregularities—most of which were highlighted in a report submitted by the government’s auditor last year—in the process of bidding out large 4,000 megawatts (MW) power projects, in a move that could further embarrass a government that has already been roiled by controversies related to the allotment of coal mines and radio waves.

Mint learns that the investigations are in an early stage, and focus on almost all entities involved in the allotment of the so-called ultra mega power projects (UMPPs), one of the linchpins of this government’s power policy.

Among the various issues highlighted by the Comptroller and Auditor General’s (CAG’s) report are: the appointment of EY (formerly Ernst and Young) as consultant and the manner of rejection of rival ICRA Ltd; the diversion of surplus coal from the Sasan project, resulting in a benefit to Reliance Power Ltd of 29,033 crore; and the decision to allow Reliance Power and Tata Power Co. Ltd to reduce their holdings in the projects to 26% from 51% after two years, a move that would allow these companies to cash out.

An EY spokesperson said the firm was “not aware of a preliminary enquiry" and hadn’t received “any communication from CBI with regard to the said preliminary enquiry".

While a Tata Power spokesperson declined comment, a CBI spokesperson didn’t respond to an email sent last week seeking comment.

A Reliance Power spokesperson said, “In pursuance of directions of the Hon’ble Supreme Court, the CBI is routinely conducting enquiries into all matters covered by the CAG report on coal blocks and allocation. As part of this exercise, it appears the CBI may also be enquiring into the ‘surplus coal from Sasan’."

He added that the company would “welcome an independent enquiry by the CBI and monitored by the Hon’ble Supreme Court, which will clearly establish our bona fides, and once and for all establish beyond doubt that we have been the unfortunate victims of a mischievous campaign of calumny and vilification on this subject, conducted at the behest of our unscrupulous corporate rivals over the past 5 years".

“The decision of the Union Government on the Sasan surplus coal matter was in fact challenged by Tata Power Co. (TPC) in the High Court of Delhi, and that petition has been thrown out and dismissed, with strictures against TPC for suppression of facts. The use of Surplus Coal from the Sasan UMPP Coal Blocks for power generation has been approved by the Government, through EGOMs (empowered group of ministers) on two separate occasions, once in 2008 and again in 2012," the spokesperson said in an email.

A senior government official, who spoke on condition of anonymity, said a preliminary enquiry has been initiated “by CBI" and “CAG’s findings have become the terms of reference of this enquiry".

A second government official independently confirmed that an investigation was on.

A third person aware of the development said that CBI had started its initial enquiry a few months ago.

CBI had mentioned the diversion of coal from Sasan in its report to the Supreme Court last month on the Radia tapes —intercepted phone conversations between corporate lobbyist Niira Radia, ministers, bureaucrats, and executives in several companies.

The original bidding norms for the power projects said that coal meant for one could not be used for other projects owned by the successful bidder. This was amended to allow Reliance Power to use the surplus coal for a 4,000MW power plant it is developing at Chitrangi in Madhya Pradesh. The firm has committed to sell power generated at Sasan at 1.19 a unit, and plans to sell the power generated at Chitrangi at 2.45 a unit.

“There is also no vitiation of bid conditions, as the same gave the right to the Government to permit use of surplus coal, and stringent conditions have been imposed by the EGOM for use of such coal strictly for the purposes of generation of power, to be sold at prices determined by competitive bidding," added the Reliance Power spokesperson.

The government wants to set up 16 UMPPs to meet the needs of the country. While nine UMPPs were originally planned, only four have been awarded—at Mundra in Gujarat, Sasan in Madhya Pradesh, Krishnapatnam in Andhra Pradesh, and Tilaiya in Jharkhand. Tata Power has won the rights to build the plant at Mundra. Reliance Power won the rights to build the other three plants.

Reliance Power has sued HT Media Ltd, publisher of Mint, in the Bombay high court over a 12 May 2010 front-page story in Mint that it disputed. HT Media is contesting the case.

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