Coal news and updates

Block de-allocation to hit economy: Government to SC

The government has told the Supreme Court that de-allocation of coal blocks will have an adverse impact on the economy, particularly the banking sector, as companies have invested a total of Rs 2,86,677 crore towards exploration, mining and attached end-use projects — about 3% of the GDP.

The government said the total investment at stake is substantial considering that the overall investment rate in the economy was about 35% of the GDP in 2011-12. "...it can be safely assumed that the investment outstanding in the captive coal blocks and in the downstream sectors of the order of 3% of the GDP would directly translate into an equivalent exposure for the financial sector in terms of outstanding loans, as well as funds raised from other sources (including NBFCs, private equity, promoters)," the government told the Supreme Court.

The captive blocks are expected to produce 100 million tonnes (mt) of coal by 2016-17, feeding about 20,000-mw power plants, 6-7 mt sponge iron plants and 13 mt of cement plants.

The government had set up a committee under additional secretary (coal), constituting officials from department of industrial policy and promotion, department of financial services, department of economic affairs and Planning Commission, to assess the flow of investment in captive coal blocks.

Of the total 2,86,677 crore invested in coal blocks, about 97% investments have been made in end-use projects like power, steel and cement units. "Apart from direct impact on production of coal, there will be an impact on downstream economic activities/sectors as demand for coal is derived from demand for electricity, steel, cement etc," the affidavit said. It said there would be similar effects on employment generation as 100 mt coal production by 2016-17 will require engaging 38,000 workers.

The government said that captive blocks would play an important role in augmenting coal production capacity and cancellation of the mining licences will increase the country's import dependence, it said.

Of the 178 allocated captive coal blocks, 35 blocks have come into production, five blocks are nearing production with green clearances and land in place while 16 blocks have made substantial progress by securing environment and forest clearances. Nine blocks have made moderate progress by securing either environment or forest clearance.

Source: The Economic Times