Coal news and updates

Auctioned blocks may be sold only after output begins

The government plans to bar the winners of the country's first auction of coal blocks from selling the prized asset or even diluting equity, until the mine is fully developed and production begins, as it wants to prevent alleged hoarding of mines and profiteering from the scarce resource.

The companies, however, can approach the coal ministry for any change in the ownership pattern and the ministry will have a final say on the matter. It will consider such requests on a case-by-case basis, official sources said.

The government has been under fire for alleged irregularities in awarding precious coal blocks to private companies, particularly those which have made money from the allotment without mining any coal at all. The CBI is investigating the alleged irregularities.

The coal ministry has identified 37 coal blocks for allocation to private companies under the country's first-ever auction, of which 18 are likely to be offered in the first phase, a government official said.

The coal ministry is drafting guidelines for the auction. These will shortly be sent for consideration of the cabinet committee on economic affairs for approval, a senior government official said. "As per the draft guidelines, the companies will be required to take prior consent of the coal ministry before diluting equity, if the blocks have not come into production. The clause has been inserted so that companies do not grab blocks and sell them as has been alleged by the Central Bureau of Investigation in some cases," the official said.

He said such a condition does not exist in the allotment letters of the captive coal blocks awarded so far. The coal ministry periodically reviews progress of the allocated coal blocks but it is not informed about any change in ownership of the companies.

The Central Bureau of Investigation had last year booked promoters of Navabharat Power for allegedly selling a stake at inflated price to Essar Power in July 2010. The Hyderabad-based company was originally owned by T Vikram Prasad and Harishchandra Prasad.

Another company Grace Industries was charged for selling the company after allocation of Lohara east coal block in Maharashtra in 2008.

"The 18 coal blocks identified for the first phase of auction have the necessary clearance from the environment ministry. We had earlier decided that we would not allot or auction any coal blocks before taking nod of the environment and forest ministry," the government official said. ET had reported this on Monday.

He said the remaining blocks would be put on block once they secure the necessary clearances. Not even a single coal or lignite block has been awarded for captive use to private companies since October 2008 despite acute fuel shortage as the government decided to shift to auction method for allocation.

The coal ministry had identified 54 coal blocks with over 18,000 million tonnes reserves for captive allocation under three categories depending on their end use - for commercial mining to sectors like steel and cement; power firms and government companies.

Of this, 14 coal blocks have recently been awarded to stateowned power generation companies including NTPC and Satluj Jal Vidyut Nigam.

Source: The Economic Times