Only ‘Non-Serious’ Players to Lose Coal Block Permits

IMG to seek investment details from 58 mine operators

    The government will ask the operators of 58 coal blocks that have been issued show-cause notices to provide details of investments this week to ensure only non-performers lose their mines, a top government official told ET on condition of anonymity. The investment proofs to be sought include progress on projects for which the coal was to be mined, such as power plants and details of mine development. "The non-serious players who have either not seriously followed up for clearances or have not invested in setting up the end plants… their mines will be de-allocated," the official said. 
But the government will be "cautious" in taking away mines after the finance ministry expressed concerns to the coal ministry on the impact of large-scale de-allocations on the banking system, which is already groaning under substantial nonperforming assets, the official said. Deepak Parekh, the influential chairman of HDFC, has warned that the banking system could face a serious crisis if a large number of allotments were cancelled. 
So far, show-cause notices for de-allocation have been served for 58 coal mines, including those held by the Tatas, the Naveen Jindal Group, Hindalco, Reliance Power and ArcelorMittal. 
The inter-ministerial group (IMG) headed by Zohra Chatterji, additional secretarycoal, will now meet between September 6-8 and will seek details from all the companies that have been served show-cause notices. "The latest progress as reported by the Coal Controller will also be taken into account before recommending action against the coal block allocatees. IMG has also firmed up the guidelines for proportionate deduction of bank guarantees for failure to achieve milestones for development of the block," the government said in a statement. "Allocations will be cancelled on the basis of the inter-ministerial group's report. Also, the Central Bureau of Investigation (CBI) is enquiring (into) allocations which were made in wrongful manner," CoalMinister Sriprakash Jaiswal said. 
IMG has to decide on the fate of the mines by September 15. In its last meeting, it had recommended de-allocation of two mines, one belonging to Naveen Jindal-controlled Jindal Steel and the other to Usha Martin. However, IMG can only make recommendations, and the final decision will rest with the government. Bank Guarantee may be Must for All 
The companies that meet the proof of investment criteria would also have to accept the new guidelines being framed by the coal ministry if they wished to retain the mine, the official said. 
Companies whose mines are located in dense forests, formally classified as no-go zone by the environment ministry, where environmental clearance has not been granted, would be given the option of surrendering their mine and have their bank guarantee returned. Fifty-eight coal mines fall in this zone. If the company concerned does not surrender the mine voluntarily, the government would reserve the right to de-allocate the mine and encash the bank guarantee, the official said. 
The coal ministry may also insist that operators of all captive mines, including those allotted before 2004, furnish bank guarantees. In case of mines allotted before 2004, bank guarantees were not applicable, the official said. Deduction of bank guarantee would be carried out in proportion to lapses by the mine operators. Fifty per cent deduction would be linked to failure in meeting milestones for development of mines and 50% to production of coal, as per the mining plan. 
The coal ministry had in April this year issued notices to these companies seeking explanation on why their blocks should not be cancelled. 
Of the 58 blocks under review, 28 with 1,718 million tonnes of reserves are with private companies. The Comptroller and Auditor General (CAG) in its recent report has questioned allocation of 20 of these 58 coal blocks. 
A final call on de-allocations will be taken after IMG gives its recommendations to the government. The Prime Minister's Office (PMO) has been pressing for a quick decision on de-allocation. A CAG report has alleged that the government has given away blocks containing coal worth Rs 1.86 lakh crore to private companies. The showcause notices issued for de-allocation are not just confined to mines reviewed by CAG. While there are some overlaps, more than half the mines are not those audited by the auditor. Based on a directive from the Central Vigilance Commission, CBI has begun investigations against coal block companies and is likely to file the first few FIRs soon.