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De-allocation of coal blocks

November 22nd, 2012 Leave a comment Go to comments

Recently, the government issued letters de-allocating coal blocks of various companies, based on the recommendations of the  Inter Ministerial Group (IMG).  This post discusses the history behind the de-allocations, the parameters the IMG used while examining the progress of various coal blocks and the action that has been taken by the government.

The Comptroller and Auditor General (CAG) released a performance audit report on ‘Allocation of Coal Blocks and Augmentation of Coal Production’ on August 17, 2012.  Some of the key findings of the Report were:

  • The government failed to conduct competitive bids for the allocation of coal blocks.  This resulted in a benefit of  Rs 1.86 lakh crore (approx.) to private allottees.  The government could have tapped some of this financial benefit by expediting the decision on competitive bidding for allocation of coal blocks.
  • The implementation schedule of a number of coal blocks has been delayed by one to ten years.  This schedule relates to the time frame within which the Mining Plan for the block has to be approved, various clearances have to be submitted, land acquired, etc.
  • From 2005, the Ministry of Coal (MoC) required the allottees to provide bank guarantees which would be encashed if they failed to meet the above mentioned milestones.  The CAG observed that there was a delay in introducing the bank guarantee and linking it with milestones.

The IMG on Coal was constituted for the periodic review of the development of coal blocks and end use plants.  The IMG had requested a status paper from the Coal Controller, MoC.  This has been submitted to the IMG but is not available.  The IMG will decide if private allottees have made substantial progress based on certain parameters.  The parameters used by IMG are:  approval of Mining Plan, status of environment and forest clearance, grant of mining lease and progress made in land acquisition. They are also examining the physical status of End Use Plant (EUP), investment made and the expected date of opening of the mine and commissioning of EUP.

The IMG has made the following recommendations:

  • The coal blocks of companies that have not made substantial progress should be de-allocated.  Additionally, they have recommended the deduction of bank guarantee in the cases where the private companies have not reached the milestones as per the time line decided upon.  As of November 22, 2012, the IMG has recommended the de-allocation of the coal blocks listed in Table 1 and the deduction of bank guarantees for the coal blocks in Table 2.
  • Since, the system of bank guarantee was only introduced in March 2005, not all coal blocks had submitted a bank guarantee.  Where a bank guarantee has not been provided but there is substantial progress in meeting the milestones, the IMG may require the allottee to submit a bank guarantee.

Table 1: Coal Blocks Recommended for De-allocation by the IMG (as of November 22, 2012)

Coal BlockAllotteeCaptive End Use
Source: "Government Deallocates three more Coal Blocks," PIB, September 18, 2012, Ministry of Coal; "IMG Recommends Deallocation of Three More Blocks," PIB, September 19, 2012, Ministry of Coal; Ministry of Coal, http://coal.nic.in/letters.htm; PRS
Gourangdih ABC, West BengalHimachal EMTA Power Ltd and JSW Steel LtdPower
Rawanwara North, Madhya PradeshSKS Ispat and Power LtdSponge Iron
New Patrapara, OrissaBhushan Steel LtdSponge Iron
Brahmdiha, JharkhandCastron Mining LtdIron and Steel
Chinora/Warora (West), MaharashtraFieldmining and Ispat LtdSponge Iron
North Dhadu, JharkhandElectrosteel Castings LtdSponge Iron
Choritand Tailaya, JharkhandRungta Mines Ltd, Sunflag Iron and Steel LtdSponge Iron
Bhaskarpara, ChhattisgarhElectrotherm India Ltd, Grasim Industries LtdSponge Iron
Dahegaon/ Makardhokra-IV, MaharashtraIST Steel & Power Ltd, Gujarat Ambuja Cement Ltd, Lafarge India LtdSteel, Sponge Iron and Cement
Gondkhari, MaharashtraMaharashtra Seamless Ltd, Dhariwal Infra Ltd, Kersoram Industries LtdSponge Iron and Cement
Macherkunda, JharkhandBihar Sponge Iron LtdSponge Iron
Lalgarh (North), JharkhandDOMCO Smokeless Fuels Pvt LtdPig iron

Table 2: Coal Blocks for which Bank Guarantees Recommended to be Deducted by the IMG (as of November 22, 2012)

Coal Block AllotteeCaptive End Use
Source: "Government Deallocates three more Coal Blocks," PIB, September 19, 2012, Ministry of Coal; "Updated List of Coal Blocks," December 16, 2011, Ministry of Coal; Ministry of Coal, http://coal.nic.in/letters.htm; PRS.
Nerad Malegaon, Maharashtra Gupta Metaliks and Power Ltd, Gupta Coalfields LtdSponge Iron
Lohari, Jharkhand Usha Martin LtdSponge Iron
Radhikapur East, Orissa Tata Sponge Iron LtdSponge Iron
Bijahan, Orissa Bhushan Ltd Sponge Iron
Seregraha, Jharkhand Arcelor Mittal Indian Ltd, GVK Power LtdPower
Durgapur-II/Sariya, Chhattisgarh DB Power LtdPower
Dumri, Jharkhand Nilanchal Iron and Steel Ltd, Bajran Ispat Pvt LtdSponge Iron
Moitra, Jharkhand Jayaswal Neco Ind. LtdSponge Iron
Marki Mangli-II, III and IV Blocks, Maharashtra Shri Virangana Steels Ltd Sponge Iron
Bhaskarpara, ChhattisgarhElectrotherm (India)
Ltd
Sponge Iron
Dahegaon/Makardhokra-IV, MaharashtraIST Steel & Power Ltd Steel & Sponge Iron
Moitra, JharkhandJayaswal Neco LtdSponge Iron
Jitpur, JharkhandJindal Steel and Power LtdPower
Gondkhari, MaharashtraMaharashtra Seamless
Limited
Sponge Iron
Of the coal blocks that the IMG has recommended for de-allocation, until now the government has accepted the de-allocation of the following: Bramhadih block, Gourangdih, New Patrapara, Chinora block, Warora (Southern Part) block, Lalgarh (North) block, Bhaskarpara block, Dahegaon/Makardhokra-IV block, Gondkhari block and Ramanwara North block.  The government has accepted the deduction of bank guarantees for blocks such as Moitra, Jitpur, Bhaskarpara, Durgapur II/Sariya, Dahegaon/Makardhokra-IV, Marki Mangli II, III and IV, Gondhkari, Lohari, Radhikapur East, Bijahan and Nerad Malegaon. The letters issued by the government de-allocating coal blocks and deducting bank guarantees are available here.

For a detailed summary of the CAG Report, click here.

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