Silver lining for JSPL, Court restricts Govt to allot Tara coal block to CIL

India Infoline News Service | Mumbai | March 24, 2015 11:05 IST

The recent decision by the Government for allocating coal blocks like Tara and Gare Palma to Coal India (CIL) and not JSPL, even though the latter emerged as the top bidder for these blocks in the coal auctions, has left JSPL red-faced.

Coal extraction-mine excavator

The recent decision by the Government for allocating coal blocks like Tara and Gare Palma to Coal India (CIL) and not JSPL, even though the latter emerged as the top bidder for these blocks in the coal auctions, has left JSPL red-faced. However, in a slight relief to the Naveen Jindal-owned JSPL, Delhi High Court has restricted the government from allocating Tara coal block in Chhattisgarh to Coal India and has asked the government to explain its rationale over allocation of Gare Palma to CIL. The further proceedings in the case are shifted on March 26.

Even though JSPL and Balco had been the top bidders for the blocks in two rounds of auction, the government still decided in allocating these coal blocks to CIL, as there was a suspicion of cartelisation. JSPL had moved to Delhi High Court to protest against the decision.

The court assigned the situation for hearing  before the appropriate bench. The event was taken before a bench of justices B D Ahmed and Sanjeev Sachdeva by senior advocate Rajiv Nayar. They have managed to sought the explanation in the sanctioned of  Gare Palma IV 1, 2 and 3 blocks to CIL from the Centre.

As the government is moving faster, JSPL feared that the Coal Ministry would sanctioned the blocks  like Gare Palma IV/2, IV/3 and Tara in Chhattisgarh to someone else. Coal Ministry have cancelled bids of JSPL and Bharat Aluminium Company (Balco) for four coal blocks among speculation of cartelisation and has kept the final decision on the mines after deliberations.

The loss of the coal blocks would be a major disaster for JSPL, as it is depending on the blocks for its Tamnar power plant and Raigarh steel unit. The Gare Palma IV 2 & 3 coal has an extractable reserve of 155.49 million tonne of coal with an annual production of 6 mtpa, that would have met the entire fuel need of its 1000 mw Tamnar power project from the mines. However the company have no option now rather then looking at certain substitutes to keep the projects running. The company even now have to look in expensive importing of coal in order for its projects.

For power sector reverse bidding is followed by the government. The company with the lowest bidding price than the ceiling price get the block. In case of unregulated sector forward bidding is considered where the bidders are asked to bid over a reserve price. By far, a total of 33 coal blocks have been auctioned in two tranches. In the first lot 19 coal mines were auctioned, in the second lot 14 coal blocks were auctioned.

***Note: This is a NSE Chart

 

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