The risk of mass de-allocation of coal blocks, like telecom spectrum, is impacting investments in the coal sector, according to India Ratings & Research, a Fitch Group company.

“On the one hand the Inter-Ministerial Group (IMG) prompts the companies to explore mines. But, on the other, fear of de-allocation is a dampener,” said Salil Garg, Director (Corporates), India Ratings & Research.

According to the agency, the risk of parliamentary, judicial and regulatory review of captive coal block allocation remains high. Mass de-allocation or re-bidding is also possible given the 2G spectrum experience and the report of the Comptroller and Auditor General of India highlighting undue benefit of Rs 1,86,000 crore to private sector entities.

The credit rating and research agency also said investments to develop coal blocks could also slow down if no concrete action is taken by the Government to ensure fast-track clearance of policy issues.

“The majority of blocks in the power sector could not become operational because of pending environmental and forest clearances,” said Garg.

 

An analysis by India Ratings shows that 80 captive mines have been awarded to the power sector since 1993. Of these, only 15 mines with 26 million tonnes of reserves are operational. Another nine mines with 1.5 million tonnes reserves are likely to become operational in 2013-14.

 

In addition, 27 mines with 7.7 billion tonnes in reserve are held up pending forest and environment clearance. The remaining 20 mines are under review by the Inter-Ministerial Group.

The Government’s decision to invoke the bank guarantees of firms not developing blocks within stipulated timeframes would impact small net-worth companies such as DB Power Ltd and Shyam Metallics Pvt Ltd, among others.

 

siddhartha.s@thehindu.co.in  

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