Coal news and updates

The cancellation of coal blocks will severely shake the confidence of domestic and foreign investors, the loans from banks and financial institutions to the extent of Rs three lakh crore will become non-performing assets (NPAs) and the estimated investment of Rs four lakh crore will be threatened, apex industry body ASSOCHAM said.

 

Stating this in a note submitted to the government, ASSOCHAM has rather suggested the companies that have undertaken the development and operation of coal blocks as per the prevailing law of land should not be punished and be appreciated for contributing in development of the country.

 

The chamber lamented, An extreme step, such as possible en-masse cancellation of allocations shall adversely impact the legitimate interest of investors who participated in good faith in processes laid out over an extended period by the governments of the day, of course, in cases of proven mala fide, the law must take its own course.

 

AASSOCHAM has further proposed a two-pronged strategy as a remedial measure that those companies that have actually set up plants for manufacture of steel/cement/power/washing after allocation of coal blocks may please be allowed to continue in accordance with the mining lease entered into with the respective State Governments.

 

This will not only avoid undue hardship to the mine operators but also protect the interest of the lenders and the public at large as absence of coal shall directly affect the production of steel, cement and power, all of which are drivers of the economy.

 

Alternatively, ASSOCHAM said, at least where the mining operations have actually started, the same may be allowed to continue and in those cases where approvals/licenses have been granted or that either the mining plan is yet to be approved or the mining lease is yet to be entered, a committee may be constituted to examine on a case to case basis and the committee shall recommend whether or not the allocation is to be sustained or cancelled.

 

ASSOCHAM has further stated that the private sector has participated in allocation of coal blocks and acted diligently as per laid down law and policy guidelines framed by the Centre.

 

The companies are nowhere wrong by undertaking the development and operation of coal blocks which are as per the prevailing law of the land. For such rightful action, private companies should not be punished, but should be appreciated for contributing in the gross domestic product (GDP).

 

ASSOCHAM has however clarified that, coal is a unique and stand-alone mineral from the national perspective and the coal reserves in India are one of the largest in the world. Despite this, the demand for coal was not being fully met by Coal India Limited in 1990-91.

 

There was huge shortage of power in the country, therefore, it was acknowledged that private investment and association of the private sector would be needed in a big way to bridge the resource gap. This necessitated the amendment of Electricity Supply Act, 1948, wherein Clause (4A) was substituted by Electricity Laws (Amendment) Act, 1991 to remove the exclusion of private sector from the definition of Generating Company.

 

Post liberalization, in the 8th Five Year Plan (1992-97) a renewed focus was placed on developing energy infrastructure in the country. The 14th Power Survey indicated a requirement of increase in power generation capacity by 38000 MW during the 8th Plan period, which would require a financial investment of Rs. 1.27 lakh crore. A massive increase in power generation capacity required a concomitant rise in coal production.

 

Importing coal was not an option due to the balance of payments crisis. A note was placed before the Cabinet on 23.4.1992 containing references to certain private parties like the 250 MW thermal power plant of RPG Enterprises, which had been recommended by the Govt. of West Bengal.

 

In light of the above background, Section 3(3) of the Coal Mines (Nationalization) Act, 1973 was amended by Amendment Act, 1993 by which investment by private sector in coal mining operations for captive use in power projects and other specified end-users like Iron & Steel, Cement etc. was allowed.

 

Ministry of Coal, constituted the Screening Committee vide an office Memorandum dated 14.7.1992 for the purpose of screening proposals received for captive mining by the private sector companies for its end-use plant.

 

Private sector companies have made up to 2012, a total investment of Rs. 2.86 lakh crore on end-use projects and also on development of coal blocks which had contributed in the rapid development of the industry in particular and the country in general. These investments as on date are estimated to be Rs. four lakh crore.

 

 

Source: http://www.business-standard.com/