Steel, power & cement firms likely to get alternative coal blocks soon

Written by Subhash Narayan | Rajat Guha | Rajat Guha | New Delhi | Updated: May 30 2012, 08:58am hrs
Power, cement and steel companies, which are facing uncertainty due to environmental and other regulatory issues over their captive coal blocks, can now relax. This is because the government will soon come out with a policy on allocation of alternative coal blocks to them. The group of ministers on coal, slated to meet here on Wednesday, is expected to approve the new policy proposed by the coal ministry.

The idea, said a government source, is to remove impediments to use captive mining rights. The proposed policy would help develop projects worth billions of dollars in these sectors.

The environment ministrys recent go and no-go categorisation had put over 200 coal blocks out of bounds for mining. Though that categorisation has now been withdrawn, ministry of environment is bringing a list of inviolate areas where mining of any form will not be permitted. The new policy on alternate coal blocks can also help companies impacted by this policy.

The GoM will take up the policy at its meeting on May 30. It would then go for the Cabinet approval before coal ministry implements the policy, said the source

The GoM is also likely to clear mining in Mahan and Chhatrasal coal projects where clearances have been delayed on environmental grounds. It is also likely to review clearance given for NTPC project in North Karanpura, following the coal ministers letter to GoM chairman raising fresh issues.

The draft policy on alternate coal blocks has been framed by the coal ministry based on the recommendations given by a working group headed by Planning Commission member BK Chaturvedi and comprising the coal secretary, the power secretary and the advisor to the law minister. As per recommendations, companies that have made substantial investment in projects (placed orders for plant and equipment, acquired land and made irrevocable financial commitments) would be given preference in allotment of alternate coal blocks, if their existing mines are banned for mining due to any government policy.

But the proposed policy may not shower benefits to projects that have failed to take off or where there is a delay on part of the developers. The Chaturvedi panel draft has said that such companies (who have not made any investment in their respective projects or category B projects), would not get priority in alternate coal block allotment and would have to participate in a competitive bidding process. However, such companies will be guaranteed allotment of coal blocks as a co-allottee with the successful bidder, subject to certain conditions.

First, it will have to agree to the same terms that the successful bidder has offered. Second, the mine will have to be big enough to take care of 60% of the coal requirements of both the parties.

A source in the Planning Commission said the new policy would also give preference to large projects such as ultra mega power projects (UMPPs) for awarding alternate coal blocks.

The nod for Mahan and Chhatrasal coal blocks would provide relief to companies such as Essar Power, Hindalco and Reliance Power. Ministry of environment and foresters had constituted a committee to study mining related issues for the blocks and give its report. The report has now been submitted and GoM would base its decision on it. The GoM would also examine the feasibility of relaxing norms under Forest Rights Act for facilitating power transmission lines as recommended by the B K Chaturvedi committee.