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Who will bid for Mahan coal block? Essar or Hindalco?

Government may classify mines being auctioned out as ‘power’ or ‘non-power’, raising question of who can bid for crucial block

Hindalco Industries Ltd and Essar Power Ltd are in a quandary over who between them will bid for the crucial Mahan coal block in Madhya Pradesh that a joint venture of the two companies previously held. That’s because the government will likely categorize coal mines being auctioned out as “power” and “non-power”, restricting their use exclusively to power companies or metals companies.

In 2006, Hindalco and Essar formed a joint venture, Mahan Coal Ltd, and agreed to share the coal from the block for their respective aluminium and power plants in the vicinity. The two went ahead and built their end-use plants even before the coal mine got full clearance. Both the end-use projects, Essar’s power plant and Hindalco’s aluminium plant, were constructed at a total investment of about Rs.20,000 crore and started operations in 2013, according to the company website. Out of the targeted production, 5.1 million tonnes (mt) coal was to be supplied to Essar and 3.4 mt to Hindalco.

However, in the wake of the Supreme Court’s deallotment of 214 blocks including Mahan in September, the companies are now working out a future strategy, which will be discussed next week in a board meeting, an executive from one of the three companies said, not wishing to be named. “The companies certainly are guessing what Mahan will be marked out for and thinking of the options they have,” the executive said. “There are other blocks in the vicinity, but most of them were allotted earlier to state government companies.”

Source: www.livemint.com/