Coal mine auction: JSPL may challenge bid rejection in court

Firm says it is examining various options; plans to engage govt on decision to reject bids

Amritha Pillay, Apoorva, Utpal Bhaskar
Updated23 Mar 2015
The government has decided not to accept the closing bids for four coal blocks&#8212;three by JPL and one by Balco&#8212;submitted in the auctions held in the past two months. Photo: Getty Images<br />
The government has decided not to accept the closing bids for four coal blocks&#8212;three by JPL and one by Balco&#8212;submitted in the auctions held in the past two months. Photo: Getty Images

Mumbai/New Delhi: Jindal Power Ltd (JPL) is not ruling out a legal challenge to the National Democratic Alliance (NDA) government’s decision to reject its closing bids for three coal blocks. The firm controlled by Congress party leader and former parliamentarian Naveen Jindal also plans to ask the government to reconsider its decision.

The government has decided not to accept the closing bids for four coal blocks—three by JPL and one by Bharat Aluminium Co. Ltd (Balco)—submitted in the auctions held in the past two months.

“Nothing prevents us from taking the legal route. That is not ruled out. It is one of the options available,” said a Jindal Steel and Power Ltd (JSPL) executive, requesting anonymity. “We have to take a considered decision. A final decision will emerge shortly.

JPL is a subsidiary of JSPL.

“We are still mulling over it. Various options are being considered. The decision has taken us by complete surprise. The bids were conducted in a transparent process,” said Ravi Uppal, managing director and group chief executive officer, JSPL.

“We will make an appeal to the government and want to engage in a discussion with the government. We are not a hostile party and are looking at various options,” Uppal added.

In response to a direct query about “considering a legal challenge”, a JPL spokesperson, in an emailed response, said, “In order to safeguard the interest of stakeholders of Jindal Power Ltd, we are evaluating various available options to present the facts to the government.”

“The government is well within its rights to reject any bid which does not reflect the value of the resource. The rejection itself underlines the fact that the auctions have been very transparent and objective, because if they were not, we would not have been able to point out this discrepancy,” said Vivek Bharadwaj, the nominated authority responsible for conducting the auctions who is also joint secretary in the coal ministry, on Saturday.

On the possibility of JSPL challenging the cancellation in court, Bharadwaj said, “Many companies have challenged many things. So how can that be an issue?”​

JSPL, GVK Power (Goindwal Sahib) Ltd, Jayaswal Neco Industries Ltd, Electrosteel Castings Ltd, Utkal Coal Ltd, Prakash Industries Ltd, MP AMRL (Bicharpur) Coal Co. Ltd and Mandakani Coal Co. Ltd had approached the Delhi high court challenging the assessment of the compensation that would be payable to them for the development of mining infrastructure, in case they were unable to win mines in the auctions.

A final list of successful bidders for the second round of coal auctions for schedule III mines updated on the website of MSTC Ltd, the nodal agency to monitor the coal auctions, had left out the names of Jindal Power, Jaypee Cement Corp. Ltd, Hindalco Industries Ltd, Usha Martin Ltd and Trimula Industries Ltd for certain blocks. These bids, except for Jindal Power’s, have now been accepted by the government. The final list for the first round of coal auctions for schedule II mines had left out the bids of Balco, BS Ispat and Jindal Power. BS Ispat’s bid has now been accepted.

“We are puzzled with the (government’s) decision,” said a JPL spokesperson in an emailed statement earlier on Saturday.

“We came to know about the decision past midnight. The reason cited being ‘the highest bidder doesn’t reflect fair value’, which we fail to understand as our bid was much below the ceiling price during the reverse auction process,” the statement said.

“We would make our best efforts to engage in a dialogue with the coal ministry and government authorities to present the facts,” the JPL statement further said.

This comes in the backdrop of the Parliament passing the Coal Mines (Special Provisions) Bill, 2015, on Friday, allowing the government to award around 15-20 blocks in the third round of coal block auctions. Two rounds of coal block auctions have already fetched the government 2.09 trillion from 33 blocks, giving credence to the national auditor’s claims that the allocation of mines over the years had caused substantial losses to the national exchequer.

“Bids for Gare Palma 4/1, 4/2, 4/3 and Tara coal blocks not accepted,” coal secretary Anil Swarup said in a post on Twitter.

In another post, Swarup said, “Government takes decision on bids for 9 coal blocks after examination. Bids for 5 blocks accepted.”

Balco had submitted a closing bid of 1,585 per tonne for the Gare Palma 4/1 block while Jindal Power had submitted a closing bid of 108 per tonne for the Gare Palma 4/2 and 4/3 blocks and 126 per tonne for the Tara coal block.

The coal mine auctions are to end the uncertainty that arose in September when the Supreme Court cancelled 204 coal-mining permits awarded to companies, terming their allotment arbitrary and illegal. The government aims to auction or allot 110 coal mines. Of these, 65 are to be auctioned and 45 allotted to state-owned firms in a process to be completed before the end of the current fiscal. The 110 mines up for grabs have around 350 million tonnes (mt) of reserves. Of these, 42 blocks with a production capacity of 90 mt are operational.

“This government is committed to make sure that the right and comparable value is received through the auction process. The department felt that there were some blocks in which the value received needs to be re-examined,” Piyush Goyal, minister for coal, power and new and renewable energy, told reporters on Friday evening.

In response to a query about whether the blocks under re-examination would be given to state-owned Coal India Ltd (CIL), Goyal said, “All options are open. We will decide.”

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