Coal news and updates

Coal block reallotment hits Bengal-EMTA wall

The Centre, anxious to conclude the process of reallocation of captive coal mines, is facing a hurdle in the form of refusal of the West Bengal government and a private miner having joint ventures with three state governments to pay the penalty imposed by the Supreme Court in lieu of the coal already mined from the cancelled blocks.

If West Bengal and the private miner — Eastern Minerals and Trading Agency (EMTA) — carry out their threat, the Centre would end up collecting over R4,400 crore less than the estimated R10,494 crore as penalty. Of course, it is doubtful whether West Bengal and EMTA’s stance would stand the scrutiny of judicial review, although resorting to such a remedy could potentially delay the reallocation process.

The SC ruling read with the ordinance promulgated by the Centre provide for the penalty to be paid by the third party (like EMTA) as the prior allottee, in case the mining lease is executed by it, subsequent to the allocation of Schedule 1 (producing) mines.

EMTA has been engaged in mining from the coal blocks allotted to the West Bengal, Punjab and Karnataka governments with a majority stake of 74% in the respective joint ventures. These state governments — each with a 26% stake in their respective ventures — will pay penalty corresponding to their stakes, as per the Coal Mines (Special Provision) Ordinance.

Interestingly, EMTA and West Bengal are refusing to pay the penalties, while the Punjab and Karnataka state governments have already paid their dues.

After the apex court’s order on cancellation of 204 blocks, it was estimated that West Bengal, Punjab and Karnataka (along with the third party) would pay

R1,567 crore, R1,533 crore and R449 crore, respectively, in lieu of coal already mined.

EMTA has so far refused to pay over R2,600 crore as its share of penalty.

A coal ministry official told FE that EMTA being a private miner, it is not eligible to participate in the upcoming e-auction, which is restricted to end-use entities. As for payment of fine, the Supreme Court may have to deal with the matter, he added. So far, the government has mopped up over Rs 6,000 crore as levy from companies for coal extracted.

On its part, the West Bengal government has refused to pay any fine and has argued that EMTA, which was the mining partner of the state with a 74% stake in the mining JV, should pay the entire amount on account of its majority holding. As for West Bengal’s eligibility for allotment of coal blocks, the coal ministry official couldn’t confirm whether the delay in payment has already made the state ineligible for allotment of coal blocks. “A right decision will be take at the time when we allot blocks to public sector entities,” he added.

Apart from EMTA and West Bengal, the state-run Damodar Valley Corporation is also yet to pay an estimated fine of Rs 220 crore.

It not clear whether EMTA can continue to work as a mine developer and operator with the states without paying the levy, but a coal ministry official said the allottees will be provided with a model document to select a mining development operator through a transparent bidding process and not through an arbitrary selection process that existed earlier.

As per the Supreme Court order, the companies had to pay the penalty for coal extracted till October by December 31 to be eligible to participate in the auctions. For operational mines, which have been allowed to operate till March 31, the order had decreed that the penalty for excess coal mined till March 31, 2015, will have to be paid by June 30.

The lower fines for the states (with the third party paying higher amounts) has brought good news for consumers as the states can now absorb the penalty hit without any significant hike in power tariff.

Source: The Financial Express