Home >Companies >Coal India faces `25,000 crore rent claim for Jharkhand’s mine land

New Delhi/Kolkata: Coal India Ltd faces a demand to pay as much as 25,000 crore from Jharkhand as rent for mining land in a clash that threatens to erode the company’s record cash reserves.

“The local administration has sent a claim to recover 11,000 crore from the world’s biggest producer of the fossil fuel," J.B. Tubid, the province’s top bureaucrat in charge of revenue and land reforms, said in an interview. “The balance owed by the miner, 90% owned by the central government, may be as much as 14,000 crore, for which another note will be dispatched in two months," he said.

“Coal India hasn’t ever paid for the land it took from the state government for the mines," Tubid said. “Land is the state’s property and we must be compensated." Coal India’s technical director Nagendra Kumar confirmed receiving the notice and said the company is in talks to resolve the matter.

The dispute may deal another blow to the Indian mining industry that is already battling environmental regulations and facing threats from Maoists who say they are fighting on behalf of poor villagers and tribal communities whose resources are exploited without any benefits. Jharkhand’s demand, which amounts to about one-third of the miner’s $10.9 billion cash, comes amid Coal India’s plan to pay a record dividend to help Prime Minister Manmohan Singh pare the budget deficit.

Negotiating claim

Coal India, which accounts for more than 80% of India’s output, operates 462 mines across the country and produced 452 million tonnes in the year ended 31 March. Shares of the Kolkata-based company fell 2.4% to 263 on Tuesday in Mumbai.

While Jharkhand and the company have been negotiating the claim for almost a year, according to Tubid, the notice came as a surprise to Coal India, Kumar said.

“We have replied to the Jharkhand government saying that under the law, Coal India isn’t required to pay them," S.K. Srivastava, secretary at the coal ministry in New Delhi, said in a telephone interview. He didn’t elaborate.

Coal India and its units, which have monopoly over mining the fuel in the country, acquire land from state governments under the Coal Bearing Areas Acquisition And Development Act. The law provides for compensation to the local administrations.

“Different states have different rules for compensation and there are no set guidelines for acquiring non-forest state land," according to Nirmal Chandra Jha, a former chairman of Coal India and now a professor at the Indian School of Mines at Dhanbad in Jharkhand.

Projects stalled

The land would have been transferred to the company through certain terms and conditions, he said. “It couldn’t have been through force."

More than $100 billion of projects have stalled, including those proposed by the South Korean steel maker Posco, Jindal Steel and Power Ltd and Essar Steel India Ltd as the government withheld clearances that threaten the livelihood of local tribes and communities.

The central government is considering a proposal that seeks to double the amount of royalty mining companies pay states for local welfare spending.

Coal India reported its lowest quarterly profit in two years and the second straight profit decline in the three months ended 30 September. Profit for the full year ending 31 March is expected to decline about 6%, according to estimates compiled by Bloomberg, as labour costs rise and a decade-low economic growth crimps demand.

The company may miss its target to produce 482 million tonnes of coal in the year through March, Chairman S. Narsing Rao told reporters on 12 December.

India produced 558 million tonnes of coal in the year ended 31 March, trailing a demand of 696 million tonnes. The gap between local output and demand for the fuel is expected to widen through the year ending March 2017, according to a presentation on Coal India’s website. Bloomberg

Subscribe to Mint Newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.

Never miss a story! Stay connected and informed with Mint. Download our App Now!!

Edit Profile
My ReadsRedeem a Gift CardLogout