State govt inaction and market trouble delay coal production

State govt inaction and market trouble delay coal production

By NAVTAN KUMAR | NEW DELHI | 2 April, 2016
Only six of the 31 coal blocks, auctioned to private players in three rounds, have started production due to delay in clearances by the state governments and unfavourable market conditions.
The coal blocks which have started production are Amelia North Jaiprakash Power Ventures Limited, Sarisatoli CESC Limited, Talabira I GMR Chhattisgarh Energy Limited, Belgaon Sunflag Iron and Steel Co. Limited, Chotia Bharat Aluminium Company Limited and Gare Palma IV/4 Hindalco Industries Limited.
Nine coal blocks were offered for auction in the fourth tranche. However, the auction, which was supposed to take place in January, was cancelled due to poor response from bidders in sectors like steel as well as adverse market conditions.
Three rounds of auctions were held last year after the Supreme Court cancelled the allotment of 204 coal blocks in 2014, following which 31 blocks were given to private companies. The government generated a revenue of Rs 726 crore from the auction. Besides auctioning 31 coal mines in three tranches, the Coal Ministry also made an allotment of 42 coal blocks to central or state government companies. 
“Getting a coal block is fine. But it is very important to have all the clearances before a company can start operating it. As things stand today, issues related to land acquisition, forest and environment clearance, rehabilitation etc have not been addressed, which is leading to delay in operationalisation of the blocks,” said a source familiar with the issue.  
Leading consultancy firm PricewaterhouseCoopers (PwC), in its recent report has highlighted the issue, saying: “The key issue that winning bidders are facing is delay in the grant of all clearances and approvals that were expected to be granted as soon as the blocks were taken over by them. The challenge now lies in developing these mines at efficient cost and maximising the recovery of resources following robust bidding which has resulted in a higher fixed commitment.”
Amit Datta, a senior official of the Coal Consumers Association of India, attributed the delay to market conditions: “Since both domestic production and import has increased, and there in no longer a derth of coal in India the companies are not taking an interest. That is the reason why development of coal blocks is getting delayed.”
“Development of a coal block needs massive capital outlay. Why would companies invest in the venture when coal is easily available? I cannot blame the companies for it. Coal is in excess in India at present. It was a different scenario three years ago. The government is making efforts from its end but we will have to wait for some time for the companies to start production in their respective coal blocks,” added Datta.
Besides the procedural delays, agreement signed with the state government stipulates that delays in operationlisation of mines would lead to penalties, which is also worrying the companies, sources said, adding, such procedural delays point towards lack of coordination between government agencies. Also in some cases the operational mines have not been transferred to the new allottees. In some other cases, state agencies are treating them as fresh applications, leading to delay.
Taking a serious view of the situation, Prime Minister Narendra Modi recently asked the Coal Ministry to take steps, including holding regular discussions with the state governments to resolve issues related to mines. “The PM has made it clear to the ministry to focus strongly on bringing production auctioned as well as allotted coal blocks,” said the source. The government is targeting a two-fold jump in the coal production to 1.5 billion tonnes by 2020.
Following the PM’s directive, the Coal Ministry is conducting regular follow-up and review meetings with the states to resolve and discuss issues related to auction/allotment of coal blocks. The officials are tracking transfer of land, mining leases, and clearances among others in coordination with the state governments.
The Coal Ministry is also monitoring work of three critical rail lines, including Tori Shivpur railway line in Jharkhand, 15 siding projects, linkage rationalisation plan and new washeries for commissioning as per the schedule.
 

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