New Delhi: Large companies under review by an inter-ministerial group (IMG) looking into coalfield allocations have had mixed results.
JSW Steel Ltd lost its Gourangdih ABC field in West Bengal for having spent too little on it, but Reliance Power Ltd’s (R-Power) 4,000 megawatts (MW) Sasan power project could keep its Mohar and Mohar Amlori Extension coalfields in Madhya Pradesh because they showed they had started mining, a coal ministry official said.
“It turned out that JSW and its partner spent only Rs.5.5 crore in developing the Gourangdih block,” the official said, requesting anonymity. “It showed they are not very serious about it.”
A JSW Steel spokesman said it was too early to comment since the firm has received no communication from the government.
Tata Steel Ltd’s Pachmo coalfield in Jharkhand was saved as its fate is intertwined with that of the Kotre Basantpur field, also in the same state, as the company submitted a joint mining plan for the two blocks, the official said. One of the two fields falls in the environment ministry’s so-called no-go zone—forest areas where no industrial activity is permitted.
So far the government has cancelled the ownership of nine coal blocks and revoked the bank guarantees submitted for seven coal blocks. Several more such actions are on the anvil as IMG’s recommendations reach coal minister Sriprakash Jaiswal.
At IMG’s next meeting on Thursday, the last of the private companies under scrutiny will be reviewed, after which the ministerial group will move to the next tranche of blocks held by government companies out of a total list of 58 coalblocks.
These firms have been issued show-cause notices by the coal ministry. The drive of cancelling and forfeiting of bank guarantees began after the Comptroller and Auditor General of India (CAG) submitted a report to Parliament on 17 August alleging a notional loss of Rs.1.86 trillion on account of coal-block allocations.
A show-cause notice is not an indictment. It’s a notice asking a company to explain its position on a specific issue.
JSW Steel got the Gourangdih ABC block in 2009; Sasan’s blocks were obtained in 2006 and Tata Steel’s in 2005. Given the long gestation time involved in developing mines and the not-easy-to-receive clearances, JSW’s cancellation of its block may seem like it was not given enough time to start work.
“They had to buy a geological report and develop the block. In totality, the amount spent was very little,” the coal ministry official said. With regard to Sasan, the official said that satellite imagery done by the coal ministry on 64 blocks earlier in the year revealed that Sasan had exposed the coal, “which was one step from actual mining”.
R-Power announced on 3 September that it had commenced production at its blocks in Madhya Pradesh and in another press statement on Monday that it had got connected to the national grid.
In its latest release, R-Power also said the Sasan ultra mega power project’s first 660 megawatts (MW) unit was “nearing completion”. The company said it had the largest portfolio of captive coal reserves, estimated at 2 billion tonnes.
A questionnaire sent to R-Power remained unanswered till press time. Tata Steel declined to comment.
An analyst said the companies were not out of the woods yet specially as a Supreme Court petition, under which the government has been served a notice, could change the game.
“All of them could be questioned,” said the analyst, declining to be named. “Within the ruling party there are factions, so the coal ministry’s actions so far may be seen favouring some business groups and hurting others but at the end of it, all could be questioned.”
Arcelor Mittal, GVK lose bank guarantees
The IMG in its meeting on Wednesday recommended cancelling the ownership of three coal blocks and the forfeiture of bank guarantees submitted by the owners of four block, including ArcelorMittal India Ltd and GVK Power (Goindwal Sahib) Ltd, the coal ministry said in a statement.
Following are the details of the blocks recommended for cancellation, according to a coal ministry list that Mint has reviewed:
1) Gondkhari block in Maharashtra belonging jointly to Maharashtra Seamless Ltd, Dhariwal Infrastructure (Pvt) Ltd and Kesoram Industries Ltd;
2) Choritand Tailiaya block in Jharkhand belonging jointly to Rungta Mines Ltd and Sunflag Iron and Steel Co. Ltd; and,
3) North Dhadu block in Jharkhand belonging jointly to Jharkhand Ispat Pvt. Ltd, Pavanjay Steel and Power Generation Pvt. Ltd, Electrosteel Castings Ltd and Adhunik Alloys and Power Ltd.
Following are the blocks recommended for forfeiture of bank guarantees:
1) Seregarha block in Jharkhand belonging jointly to ArcelorMittal India Ltd and GVK Power (Goindwal Sahib) Ltd;
2) Moitra block in Jharkhand belonging to Jayaswal Neco Industries Ltd;
3) Durgapur II/Sarya block in Chhattisgarh belonging to DB Power Ltd; and
4) Dumri block in Jharkhand belonging jointly to Nilanchal Iron and Power Generation and Bajrang Ispat Pvt. Ltd.
Apart from the de-allocations, the coal ministry could also take up other blocks that were not issued show cause notices, but were given caution letters. “By October, everything may get cleaned up,” the coal ministry official said. “They may even get together with the environment ministry and get the clearances moving.”
The impact of the government deallocations could make many block owners speed up the development of their reserves, the official added.
Chintan Mehta, a metals analyst with Mumbai-based Sunidhi Securities and Finance Ltd, said sponge iron-making companies whose coal blocks have been cancelled would be hit badly. “Typically, sponge iron producers with captive mines would stand to make a margin of up to 30%. If they have to buy coal via the e-auction route, that margin would come down to 15-20%,” he said.
Mehta added that stocks of several listed companies including Maharashtra Seamless, Sunflag, Electrosteel, and GVK Power, could be significantly impacted when markets open Thursday. Stock markets were closed on Wednesday on account of Ganesh Chaturthi festival.
ruchira.s@livemint.com
R-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.
