Thursday, Dec 18, 2014

Re-auction coal blocks but save 46: Government to Supreme Court

The government also said that 46 of these blocks could, however, be exempted from the cancellation. The government also said that 46 of these blocks could, however, be exempted from the cancellation.
New Delhi | Posted: September 2, 2014 5:37 am

In a pragmatic move, the Centre on Monday told the Supreme Court it had no problem with cancelling all extant coal mine leases among the 218 ones declared illegal by the court last week and that it was willing to auction these blocks afresh. But the government pleaded that it be given the discretion to deal with the aftermath of such a decision expeditiously.

The government also said that 46 of these blocks could, however, be exempted from the cancellation exercise given that 40 of them have already begun production (with their end-use plants in place) and the rest are about to commence operations.

While both the court and the government seemed aware of the economic ramifications of an inefficient handling of the imbroglio, the government suggested that the court could ask the companies operating the 40 functional blocks to compensate the government for the CAG-estimated loss to the exchequer of R295 per tonne. They could also be told to enter into fresh power purchase agreements with utilities so that the power produced from these blocks are sold at sub-market prices, factoring in the benefit captive coal, attorney general Mukul Rohatgi told the bench headed by Chief Justice RM Lodha. The government would submit details of operational mines to the court shortly.

The price of e-auction coal (which the power plants with captive coal will have to resort to in case of deallocation), is three times that of captive coal while imported coal at current prices could be five times more expensive.

Out of the 218 captive blocks that the SC deemed illegal, 105 belong to private companies. Of these, industry sources say 42 blocks are operational and they already produce around 53 million tonnes (mt) of coal, less than 10% of the country’s total output of the fuel. As per an estimate, captive blocks allocated so far were expected to produce 100 mt of coal by 2017.

Among the coal blocks currently under production are those belonging to private firms like Jindal Steel and Power (Gare Palma IV/1), its subsidiary Jindal Power (Gare Palma IV/2 & 3), Hindalco Industries (Talabira-I), CESC (Sarshatali), Monnet Ispat and Energy (Gare Palma IV/5), and Sarda Energy (Gare Palma IV/7).

Public sector companies producing coal from allocated mines include SAIL (Tasra), Damodar Valley Corporation (Barjora North) and West Bengal Power Development Corporation ( Barjore).

Posting the matter for further hearing on September 9, the court asked the coal ministry and the three industry associations concerned — the Coal Producers Association, Sponge Iron Manufacturers Association and Independent Power Producers Association of India — to file affidavits stating their respective stand in light of last week’s judgment.

During the hearing, the SC bench observed that “the Union is very clear that auction should take place. They are very clear that all the continued…

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