Coal ministry cancels allotment of 18 coal blocks

Government to decide the fate of 10 more coal blocks on February 25

By Anupam Chakravartty
Published: Friday 21 February 2014


Coal blocks allocated to power and steel companies over the past two decades are now being taken back from these firms after the Comptroller Auditor General (CAG) of India pointed out large-scale irregularities in allocation and development of these coal blocks.

Earlier this month, the Inter-Ministerial Group (IMG) recommended cancellation of 28 coal blocks. More than 100 mining, power and steel companies were to source their raw material from these coal blocks.

Following IMG’s recommendation, the Union Ministry of Coal on February 17 issued letters of cancellation for 18 coal blocks. Companies that have been allocated these coal blocks have either failed to secure requisite environment and forest clearances for developing them or failed to start coal production, state the letters. These coal blocks were allocated to steel and power biggies, including ArcelorMittal, Hindalco, Tata Power, Reliance Energy, GMR, Lanco, Jindal Steel and Power Limited (JSPL) and Vedanta-owned Sterlite.

The ministry, however, put on the hold the cancellation recommendation for 10 coal blocks after companies that were allocated these captive coal blocks approached the court against IMG’s decision. These companies include Essar Power, Tata Steel, JSW Steel and DB Power.

IMG will now meet on February 25 to decide the fate of these 10 coal blocks.

Legal action against ministry

The industry associations have strongly criticised the move, saying companies have made large-scale investments in developing these blocks. Some companies whose coal blocks have been de-allocated plan to approach the judiciary.

JSPL issued a statement earlier this week that it will challenge the decision to scrap Ramchandi coal block, which was to supply coal for its coal-to-liquid project in Talcher region of Odisha. JSPL claims it has invested Rs 77,450 crore on the project, which will provide employment to over 30,000 people. However, according to the show cause notices issued by the Ministry of Coal on June 17, 2013, the company did not submit an application for mining lease nor did it formulate a mining plan. Its forest and environmental clearances are still pending.

Similarly, IMG also de-allocated Arkhapal-Srirampur (north) block in Talcher, held by Strategic Energy Technology Systems (SETSPL), a joint venture between a consortium of Tata Group companies and South African energy major, Sasol, which wanted to develop a coal-to-liquid project.

Monnet Ispat which was allocated Rajgamar Dipside block in Sundargarh district of Odisha along with Topworth Steel, another private steel manufacturer, has also issued a statement, saying they will take recourse to legal action against the cancellation. “We will go to the court of law,” Sandeep Jajodia, chairperson and managing director of Monnet Ispat, said in a statement issued on Wednesday. Jajodia claimed that South Eastern Coalfield Limited, a PSU, was mining in the lease area and the Ministry of Coal was supposed to clear out the surface area. Till the surface area of the coal block was ready to be mined, Monnet and Topworth were given “grace period”. Both the companies made an investment of Rs 6,729 crore.

In the case of the Rampia and Dipside coal blocks in Sundargarh, the blocks were jointly allocated to Lanco, Sterlite Power, GMR Energy, Navbharat Power, ArcelorMittal and Reliance Energy. IMG recommended cancellation of the blocks, but the decision was put on hold after an interim stay granted by the Delhi High Court. While Arcelor Mittal had surrendered its share of the coal block, Ministry of Power during the meeting stated that Sterlite, GMR and Lanco had invested Rs 8,287 crore, Rs 5,600 crore and Rs 4,800 crore, respectively, in their end-use plants.

Irregularity in allocation

The decision to de-allocate the coal blocks comes following the Attorney General G E Vahanvati’s statement in the Supreme Court earlier this year that the Union government would be reviewing allocation to 61 coal blocks. On January 15, the Ministry of Coal served a three-week ultimatum to the companies sitting on the 61 blocks, where mining leases were not executed to furnish proof of the requisite clearances obtained by them to operationalise their captive mines. Ministry officials say most companies could not furnish documents related to clearances in this “short span of time”.

Earlier, Comptroller Auditor General’s (CAG) report stated that by not adopting an auction route for 208 coals blocks across central India, the government exchequer faced losses up to Rs 1.86 lakh crore. Following the CAG report, the Central Bureau of Investigation is investigating the matter.

The companies whose coal blocks are under review include, Tata Steel Ltd, Tata Sponge Iron Ltd, Tata Power Co. Ltd, Jayaswal Neco Ltd, JSPL, Reliance Energy Ltd, Ultratech Ltd, Rungta Mines Ltd, Essar Power Ltd, Hindustan Zinc Ltd, Hindalco Industries Ltd, DB Power Ltd, Adani Power Ltd, Arcelor Mittal Ltd, GVK Power Ltd, Bhushan Power and Steel Ltd, Monnet Ispat and Energy, Sterlite Energy Ltd, GMR Energy Ltd, Usha Martin Ltd, JSW Steel Ltd, Jaiprakash Associates Ltd, ACC Cement Ltd, Uttam Galva Steels Ltd, Adhunik Corp. Ltd and SKS Ispat and Power Ltd.


Letter to M/s. Adani Power Ltd., reg. Review of coal blocks by the Inter-Ministerial Group (IMG) in its 24th meeting held on 7-8th February, 2014

Letter to M/s Jindal Steel & Power Ltd., reg. Review of coal blocks by the Inter-Ministerial Group (IMG) in its 24th meeting held on 7-8th February, 2014

Letter to M/s. AES Chhattisgarh Energy Pvt. Ltd., reg. Review of coal blocks by the Inter-Ministerial Group (IMG) in its 24th meeting held on 7-8th February, 2014

Letter to M/s. Sterlite Energy Ltd., Lanco Group Ltd., GMR Enerergy Ltd., Navbharat Power Pvt. Ltd., Arcelor Mittal Ltd., Reliance Energy Ltd., Reg. Review of coal
blocks by the Inter-Ministerial Group (IMG) in its 24th meeting

Meeting notice of the Inter-Ministerial Group (IMG) to undertake periodic review of the development of allocated coal blocks

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