At 1.30 p.m., the Sensex traded 16 points lower at 17,641 while the Nifty index declined 15 points at 5,348.
The CAG in its report tabled in Parliament, names more than 20 companies including Essar Power, Hindalco, Tata Steel, Tata Power and Jindal Steel and Power, which have got the blocks in various states.
On the Nifty index, Tata Steel was the top loser, down 5.5 per cent, while Reliance Infra shares declined 3.3 per cent. Aluminum maker Hindalco traded 3 per cent lower, while Jindal Steel and Power slipped 2.3 per cent.
Shares in Reliance Power plunged over 6 per cent after the CAG said 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.
Reliance Power, controlled by billionaire Anil Ambani, is developing a 4000 MW project at Sasan in Madhya Pradesh and was allotted captive blocks to fuel this project. The company later received government approval to use coal from these blocks for another power project being developed by the company.
(With inputs from Thomson Reuters)