Govt seen getting Rs 3,800 crore from Gare Palma mines

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Published: November 6, 2019 1:12:47 AM

On top of that, Rs 400 per tonne would go to the GST compensation fund.

Gare Palma mines, Jindal Steel, JSPL, Raigarh steel plant, Coal India, GST compensation fund, Edelweiss SecurtiesThe coal block in Chhattisgarh, located 40 km from JSPL’s Raigarh steel plant, has the potential to produce 6 MT of fuel every year.

The recently auctioned Gare Palma IV/1 coal block is expected to fetch the government more than Rs 3,800 crore from 45 million tonne of fuel that can be extracted through it, once operation starts. On Monday, Jindal Steel and Power (JSPL) quoted the the highest bid of Rs 230 per tonne for the block against the reserve price of Rs 150 per tonne.

Apart from the quoted price, the state government would get around Rs 197 for every tonne of coal mined from the block through various royalties and cess. On top of that, Rs 400 per tonne would go to the GST compensation fund.
The coal block in Chhattisgarh, located 40 km from JSPL’s Raigarh steel plant, has the potential to produce 6 MT of fuel every year.

The block is earmarked for steel. However, the new government guidelines allow the winner to sell 25% of coal in the open market. The fuel would be used to run 840-MW captive power station and 1.32-MTPA unit in the JSPL’s Raigarh steel plant.

“Once the mine starts producing, we can cut our reliance on expensive coal procured through import or auctions conducted by Coal India,” VR Sharma, managing director, JSPL, told FE. According to Edelweiss Securties, “Gare Palma IV/1 would be sufficient to meet about 70% of the steel division’s total coal requirement”.

The agency estimates a cost benefit of about Rs 500 crore per annum for JSPL from lower coal costs, potentially translating into a 7% rise in its earnings before interest taxes depreciation and amortisation in FY21. The block earlier belonged to JSPL, before the apex court in its September 2014 order had cancelled licences of 204 captive blocks, stating these had been allocated in an illegal and arbitrary manner. The company had already made significant investments to transport extracted coal smoothly from the mine.

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