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Coal ministry cancels allocation of four blocks

Move likely to intensify criticism over coal block allocations; next IMG meeting today
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First Published: Thu, Sep 13 2012. 04 37 PM IST
Thursday’s cancellations came a day after an inter-ministerial group reviewed the cases of private block owners. Photo: Noah Seelam/AFP
Thursday’s cancellations came a day after an inter-ministerial group reviewed the cases of private block owners. Photo: Noah Seelam/AFP
Updated: Thu, Sep 13 2012. 11 51 PM IST
New Delhi: Coal minister Sriprakash Jaiswal cancelled the allotment of coal blocks to four companies and decided to encash the bank guarantee of one of them, the coal ministry said on Thursday, in what seemed to be a tacit admission of a faulty natural resources policy and holding out the prospect of more such terminations.
The move is likely to intensify criticism over the government’s coal block allocations, which the Comptroller and Auditor General of India (CAG) said may have led to notional losses of Rs.1.86 trillion, analysts said.
“This move of cancelling four blocks shows they are rectifying things, but it is also an admission that the process was wrong,” said Pralay Kanungo, head of the Centre for Political Studies at Jawaharlal Nehru University. “Even if they cancel more blocks, the big issues will be kept alive and become an issue for election.” State elections are due this year and next, while the next general election is scheduled to be held in 2014.
Thursday’s cancellations came a day after an inter-ministerial group (IMG) reviewed the cases of private block owners. The CAG report tabled in Parliament on 17 August had also alleged a lack of transparency and objectivity in the allocation of the coal reserves totalling 43.35 billion tonnes.
Among the blocks cancelled was the Bramhadih block in Jharkhand allotted to Castron Mining Ltd; Chinora and Warora (Southern Part) blocks in Maharashtra given to Field Mining and Ispat Ltd; and Lalgarh (North) block in Jharkhand allotted to Domco Smokeless Fuels Pvt. Ltd, the coal ministry release said. The Marki Mangli-II, III and IV block allotment in Maharashtra to Shri Virangana Steels Ltd was cancelled and the bank guarantee encashed, the coal ministry release added.
Aside from this, the coal ministry asked Monet Ispat and Energy Ltd to submit a bank guarantee to the equivalent of the royalty sum for three years. At the time of the allocation of the Utkal B2 block in 1999, this key provision had been overlooked.
IMG is reviewing the cases of 58 coal block owners—a mix of private and government firms—that were issued show-cause notices. On Thursday, it made the first set of recommendations on the private companies.
An analyst said the cancellations could make matters messier as companies could go to court seeking relief.
“What was done was as per their policy decision. So you can’t change it retrospectively. Probably companies could resort to the judicial system to get a reprieve,” said Rakesh Arora, managing director and head of research for India at Macquarie Capital Securities (India) Pvt. Ltd.
Kanungo said political connections appeared to have been used to secure blocks and that owners had cashed in the value of the blocks by selling their stakes. Companies with no background in the industry had been allotted coal blocks, he said.
Other analysts and company officials have pointed to the lack of guidelines on the sale of blocks, on cancelling allocations and slow remedial measures.
The meetings of IMG will continue, with the next one to be held on Friday, as it reviews the remaining blocks, the coal ministry said. Sittings will continue as needed, it said.
The cancellations came after the government came under immense pressure, including a revelation by the Times Now television channel on Thursday that coal minister Jaiswal may be associated with Manoj Jayaswal of the Abhijeet Group, one of the companies that figures large in the allocations. The minister had denied any association with his namesake
Some analysts said the number of firms that could get caught up in the controversy may swell, as 289 companies were given 195 blocks from 1993 to 2011. Some of them may have got the blocks on the strength of lobbying by influential politicians, they pointed out.
Rajya Sabha member of Parliament Vijay Darda and his brother Rajendra Darda, a minister in the Maharashtra government, have also been named by CBI. Firms under the IMG scanner included JSW Steel Ltd, Hindalco Industries Ltd, Arcelor Mittal (India) Pvt. Ltd, Sasan Power Ltd and Grasim Industries Ltd.
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First Published: Thu, Sep 13 2012. 04 37 PM IST
More Topics: Coal | Blocks | Sriprakash Jaiswal | IMG | Allocation |
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