Mumbai | Nov 13, 2015: The 34 “ready to mine” coal blocks that were auctioned earlier this year will only become fully operational by the end of the current fiscal year as companies struggle to get clearances before they can start operations.
When auctioned, these mines were operational, but mining stopped after 1 April as clearances for transfer of land and mining infrastructure had to be transferred to those who had bagged the mines. These clearances have taken longer than expected.
“Mining has started in seven of the ‘ready to mine’ blocks auctioned so far. Some clearances need to be given by the state government. All central clearances have been given. The coal ministry is already coordinating with these state governments; the schedule II mines in all 34 of them which were either auctioned or allotted will start mining before 31 March 2016,” coal secretary Anil Swarup said over the phone on 9 October.
Jaiprakash Power Ventures Ltd’s Amelia (North) mine is one the seven operational blocks.
“It took us longer than expected; it took us two months to start mining again for the state and centre were to transfer clearances. The block was with our parent in a joint venture, there were no issues between the prior allottee and the old allottee,” said Suren Jain, managing director at Jaiprakash Power.
GMR Chhattisgarh Energy Ltd, Sunflag Iron and Steel Ltd, CESC Ltd, Jaiprakash Associates Ltd and Rajasthan Rajya Vidyut Utpadan Nigam Ltd have also started operations at the coal mines they won in the first round of auctions in February, according to coal ministry data.
However, others such as Hindalco Industries Ltd, Essar Power Ltd, JSW Steel Ltd, Bharat Aluminium Co. Ltd, Ultratech Cement Ltd and Reliance Cement Co. Ltd are yet to start operations at blocks they won in February, according the data.
Emails sent to these six companies remained unanswered.
The delays in restarting mining may also cost the state governments. States such as Chhattisgarh, Jharkhand, Odisha, Madhya Pradesh, Maharashtra and West Bengal will lose out on the royalty to be earned from mining operations.
For instance, Hindalco Industries had agreed to pay the Chhattisgarh state government Rs.3,001 per tonne of coal mined from the Gare Palma IV/4 block, which has a rated capacity of 1 million tonnes per annum. Operations are yet to start at this mine, according to data shared by the coal ministry.
“The states lose immediate revenues from delays in commencement of mining operations. More importantly, companies will value new mines to be auctioned in these states lower than in states that are faster on approvals,” said Kameswara Rao, leader (energy, utilities and Mining) at PricewaterhouseCoopers Pvt. Ltd.
With the delay, companies may find it difficult to meet the performance target agreed upon as part of the bidding agreement. However, states may need to waive those performance targets for the current year, said coal secretary Swarup.
“There is a clear cut provision made out which will determine whether the fault is at their end; if the state governments have delayed it, they cannot be penalized. All of these will be looked into before determining what would be the penalty,” he said.
Swarup agrees that execution has been slower than expected.
“In India, it is a difficult job, it involves transfers of assets from one entity to the other, which cannot happen overnight. it takes a while before things happen on ground. The auctions happened quickly, but that was more of paper work. Here the action has to happen, which will happen within this financial year,” he said.
According to a September 2014 Supreme Court order, prior allottees were allowed to continue mining at these operational blocks up to 31 March. The new allottees, chosen through the auction process, were to start mining 1 April onwards.
Debasish Mishra, senior director, consulting, Deloitte Touche Tohmatsu India Pvt. Ltd says the rush to complete the online auction process is also partly to blame.
“The central government could have sought more time from the Supreme Court to complete the bid process for operating mines. In their endeavour to avoid disruption in coal production from operating mines, they rushed through certain preparatory work and consultation with state governments,” said Mishra.
(Source: http://www.livemint.com/)