With no Plan-B, players in coal sector fear ‘dark times’

“When it’s time to harvest our past investments, uncertainty looms large on the fate of thousands of crores put in projects linked with the coal mining business,” a private sector player having more than five captive coal mines said.

Private sector players in the business find themselves in a state of fix following the Supreme Court observation that the process adopted by the Government for allocating coal blocks between 1993 and 2010 were ‘illegal’, as most have not prepared a Plan-B.

Neither the Coal Ministry nor the miners or those yet to resume work are able to estimate the loss companies will have to incur in case the allocations are scrapped.

The worst-hit will be Naveen Jindal’s Jindal Steel & Power Ltd (JSPL) and its subsidiary. At stake will be nearly ₹50,000 crore of present and future investments of the company, Ravi Uppal, Managing Director and Chief Executive Officer of JSPL, told Business Line . JSPL has been allocated seven coal blocks between 1993 and 2010.

Of these, three projects with a combined investment of ₹36,000 crore are linked to the coal mines which are already operational, he said. Apart from these projects, a ₹12,000-crore investment is in the pipeline to expand the company’s Tamil Nadu power plant. For the Godda Thermal Power Plant in Jharkhand, a further investment of ₹8,500 crore had been earmarked.

But, the fate of the Godda project is now uncertain. “If the Jitpur block is de-allocated, then we won’t be going ahead with the project. We have got a level-1 environment clearance for the Jitpur mine and the land acquisition for the whole project is expected to be complete by November. But without captive coal, the power plant will not be viable,” Uppal said.

Public sector power producer, NTPC, is also awaiting the final verdict. It has been awarded six coal blocks during the period. The Hindalco-Essar combine has one of the largest coal blocks – Mahan in Madhya Pradesh. The investments involved is about ₹20,000 crore. Essar also has two blocks in Jharkhand.

Out of a total of 218 blocks allocated between 1993 and 2010 to both public and private sectors, including 12 given to ultra mega power projects (UMPPs), 80 have been already de-allocated on the recommendations of an Inter Ministerial Group (IMG) and a Review Committee.

Of the 138 remaining blocks (including UMPPs), the total reserves are to the tune of 30.77 billion tonnes, according to the Ministry of Coal. The Court, while noting that there was no illegality in the allocation to the UMPPs, had, however, clarified that the fuel from these blocks will be used only for captive purpose.

A 1,000 MW power project requires 5 million tonnes (mt) of coal annually. Coal in India costs about ₹800-900 a tonne. In the steel sector, coking coal requirement is 1.2 mt for every tonne of steel produced, which is mainly imported.

While the Government is in the process of working out its response to the apex court’s observations, industry trackers feel complete de-allocation may not be an answer.

The Government could propose de-allocating blocks where work has not yet started, while allowing the companies to continue holding blocks where projects have been commissioned as well as commercialised. This (allowing to hold producing blocks), could be done by levying a penalty, if need be, feel coal producers.

COMMENT NOW