BackJSPL may lose bank guarantee for Jitpur block
IMG has also recommended the cancellation of Bihar Sponge Iron Ltd’s Macherkunda field in Jharkhand
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New Delhi: The inter-ministerial group (IMG) recommended the cancellation of one coal field and the forfeiture of at least two bank guarantees, including that of Jindal Steel and Power Ltd (JSPL), officials from the meeting said on Tuesday on the condition of anonymity.
“We are recommending that bank guarantees of two blocks be forfeited and one block be de-allocated," said an official present in Monday’s meeting.
JSPL’s Jitpur coalfield is in Jharkhand with reserves of 81.09 million tonnes (mt) and the company has said it needs the block to feed a power plant. It did not comment till the time of going to press.
The group also recommended the cancellation of Bihar Sponge Iron Ltd’s Macherkunda field in Jharkhand which has reserves of 23.86mt of coal. No officials were available in the office of Bihar Sponge Iron to comment.
The second block on which IMG recommended forfeiture of bank guarantee is Chitarpur in Jharkhand belonging to Corporate Ispat Ltd.
So far, the coal ministry has cancelled allocations of seven coalfields based on the recommendation of the group, including Gourangdih ABC block in West Bengal given out jointly to JSW Steel Ltd and Himachal EMTA Power Ltd; Ravanwara North in Madhya Pradesh to SKS Ispat and Power Ltd and New Patrapara in Orissa to Bhushan Steel Ltd and its partners.
SKS Ispat and Power Ltd courted controversy as various media reports alleged tourism minister Subodh Kant Sahai’s brother Sudhir Kant Sahai is an honorary executive director in the company.
“There is intense speculation on the delay by the ministry in taking action against SKS Ispat," a report in The Hindu newspaper said on Monday. IMG had recommended cancellation of SKS’s block in its meeting on Saturday, but coal minister Sriprakash Jaiswal formally cancelled it only on Tuesday afternoon.
The website of SKS Ispat did not list Sudhir Kant Sahai anywhere.
The panel had earlier recommended the forfeiture of bank guarantees of six coalfields, including Tubed block in Jharkhand to Hindalco Industries Ltd and Tata Power. A questionnaire sent to Hindalco and Tata Power on Monday remained unanswered.
The IMG is reviewing 58 coalfield allocations to whom the coal ministry issued show-cause notices and has just about completed its review of half of the fields that were given out to private firms.
A show-cause notice is not an indictment. It’s a notice asking a company to explain its position on a specific issue.
The review and cancellations exercise intensified after a report of the Comptroller and Auditor General of India on 17 August saying there was a notional loss of 1.86 trillion on account of coalfield allocations.
The IMG is slated to meet again on Wednesday, which is expected to be its concluding part of the review of private companies. In the next tranche, the group is expected to take up the state-owned companies and some more de-allocations can be expected.
The IMG was set up earlier this year and comprises representatives from the ministries of power, law, finance, industries, steel and the Coal Controller, and is headed by Zohra Chatterji, additional secretary in the coal ministry.
Sanjay Sethi, senior executive director and head, infrastructure group at Kotak Investment Banking said the market has not been giving significant value to the assets that have been affected, so it is unlikely there will be significant impact on listed entities.
“But if mines have to be de-allocated, it will mean things get delayed. In cases where significant capital has been invested, it will have an impact on companies," Sethi said. “Some companies will certainly participate in the bidding process for the blocks, when it begins and are unlikely to depend on spot buying of coal."
JSPL gained 2.64% to 404.95 in Mumbai trading, while the benchmark Sensex shed 0.25% to 18,496.01 points.
“JSPL can’t go up, that is for sure," said Arun Kejriwal, director of Mumbai-based research company KRIS. “If it is hit by any other negative sentiment, it will underperform the market."
The stock markets will be closed on Wednesday for Ganesh Chaturthi.
Kejriwal said the government’s action on coalfield allocations are so far a small issue with brokers focusing on the macro picture “but somewhere down there is the expectation that this could get much bigger now that the Supreme Court is involved."
The group has not made any recommendation on the Mohar and Mohar Amlohri field alloted to Sasan Power Ltd and Pachmo block to Tata Steel Ltd.
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