Coal news and updates

Power cos inflated coal import bills for higher tariffs

December 18: Murmurs of inflating prices of imported coal by some power generation companies in order to prepare a case for higher power tariffs were being heard for some time but now it appears to be official as the Directorate of Revenue Intelligence (DRI) has found the allegation to be true.

According to media reports, the Directorate of Revenue Intelligence has unearthed a scam involving companies inflating the value of coal imports from Indonesia for their power plants, thus siphoning off money overseas.

According to information provided to ICMW by industry sources, some of the power generation companies involved in the activity had plants in Uttar Pradesh and Gujarat.

Though names of at least two private power generation companies were given by the sources ICMW is not reporting the same because official confirmation is not available.

According to media reports, the initial estimates by the DRI pegged the overvaluation at Rs 29,000 crore in the period 2011-2014. DRI has raided over 80 shipping companies, intermediaries and laboratories across the country including Maharashtra, Delhi, Gujarat, Karnataka, Andhra Pradesh, Odisha, West Bengal and Kerala in search of documents that show the real value of the imports.

DRI is also investigating some of the public sector companies that have indulged in overvaluation, according to the report.

The report said, quoting officials said that almost every importer, including the reputed corporates, have indulged in overvaluation of coal imports. DRI is learnt to have recovered documents showing the real value of the imports.

According to data available with ICMW from Central Electricity Authority (CEA), power utilities – both in government and private sector – had imported a total of 79.39 million tons of coal in 2013-14 whereas imports in 2012-13 stood at 62.547 million tons.

The majority or almost 95% of this was imported from Indonesia, ICMW understands.

The report said the modus operandi adopted by the companies was that while coal imports would directly be shipped from Indonesia, the invoices will be routed through an intermediary based either in Hong Kong, Singapore or Dubai.

"The inflated amount will be sent to the intermediary who, in turn, would remit the actual value to the Indonesian supplier. The overvalued component would be diverted to tax havens,'' the report said, quoting sources.

DRI has found that the companies did not avail of the Preferential Trade Agreement that extended concessional duties for imports from Indonesia. Steam coal imported from Indonesia attracts zero rate of duty and the companies are required to produce country of origin certificate issued by the supplier.

"The companies did not avail of this facility because in such a scenario, they would have to produce the certificate which would carry the real value,"' the reported added.