Coal news and updates

Few takers for MoU coal, SLC review awaited

March 18: It seems there have been few takers for coal under the MoU route determined by a special Standing Linkage Committee -Long-Term (SLC-LT) meeting held on December 3, 2014 to decide on the fuel supply route in the aftermath of the Supreme Court verdict on coal block de-allocation. Very few end-use plants have come forward so far to sign the MoUs with Coal India limited (CIL) for supply of coal under such a dispensation since the price of the fuel through e-auction has turned out to be cheaper compared to the MoU rate.

With March 31, 2015 round the corner, an important decision is awaited from the SLC-LT, which met as recently as March 12, 2015, pertaining to whether coal will be supplied beyond the current fiscal to end-use plants affected by the de-allocation verdict of the Supreme Court in August and September last year as well as those plants impacted by environmental clearance issues. This dispensation is operational till March 31, 2015 and will have to be reviewed for extension by the SLC-LT.

The issue can actually be traced back to March 2013 when an Inter-Ministerial Committee, against a backdrop of fuel scarcity, had put end-use plants in the following categories in relation to supplies:
i) Whose linked blocks allotted could not be developed as the Ministry of Environment & Forest (MoEF) had rejected such clearances;
ii) The linked blocks had been de-allocated; and
iii) Where development of the linked block was delayed because of non-availability of environment/forest clearances due to no-go areas etc.

These issues were discussed at the 5th meeting of the IMC in June 2014 and a decision was taken that the EUPs should be prioritized thus:
a) Those EUPs which already had long-term linkages/LoAs but their existing linkages were converted to tapering on allocation of the coal block;
b) EUPs which had been granted tapering linkage in view of a coal block having been allocated to them;
c) EUPs which did not have any linkage whatsoever; and
d) Within the second and third groups, their financial exposure was also to be considered while prioritising.

In the meantime, the Supreme Court judgment termed the allocation process illegal and the 204 blocks were de-allocated despite the fact that these proposals had been sent to the Ministry of Coal for consideration by the IMC. While there was pressure to implement the above proposals, a special SLC-LT meeting was held to decide on the matter.

The SLT-LT eventually decided that coal should be supplied to the first and second category of EUPs, subject to availability and that plants with no linkages would not be considered. The underlying principle was that preference would be given to running plants. Also, the EUPs only in the steel, cement and sponge iron sectors were to be considered. IPPs and CPP were kept outside the ambit. It also decided that CIL should assess the quantity that could be supplied and for which MoUs can be entered into between CIL and the EUPs and this would not infringe upon the quantum under the tapering linkage. The volumes would match the LoA quantity before these were tapered off on account of allocation of blocks.

Also, those EUPs whose tapering linkages had been reduced to nil but their blocks had been de-allocated, would also need to be considered.