Govt hopes for clarity on natural resources allocation

The Government, which is trying to increase power generation in the midst of lack of coal supplies, held a more optimistic view of the Supreme Court’s opinion that all coalfields allocations made between 1993 and 2010 were illegal.

It believes the Court’s final decision will bring clarity in policy related to the allocation of all natural resources.

However, companies in the business fear that any adverse decision will have a negative impact on supplies, in turn affecting the performance of coal-dependent industries such as power.

Piyush Goyal, Minister of State (Independent Charge) for Power, Coal and New and Renewable Energy, told reporters after the Supreme Court hearing on Monday that the Government is ready to act quickly once a final decision from the apex court is made.

“I look forward to finality in the matter of coal block allocations which has kept the sector in limbo for several years,” he said adding that in the last five years, coal production has not kept pace with power generation, which has created stressed assets.

A senior official at the Coal Ministry said the Government’s lawyers will present their case to the Supreme Court on September 1. “We will try to convince the Court about the demerits of de-allocation. It would be hypothetical to suggest what happens on September 1, but depending on the final decision, we will find a way out. The decision-making from our Ministry will be quick regardless of what happens next week,” said the official, who did not want to be named.

The official added that it may not be possible to de-allocate the coal blocks allocated since 1993, as some of the companies might have used the coal through allocated blocks and produced power.

Meanwhile, power producers both in the public and private sectors said that while it deepens the power sector crisis, the Supreme Court view definitely removes the uncertainty about the status of these blocks.

“Immediate remedial steps are required to be put in place by the Government to mitigate the expected fall of output from these mines. If these steps are not taken, the coal deficit situation will worsen further,” said Ashok Khurana, Director General, Association of Power Producers.

The impact on Jindal Steel & Power Ltd (JSPL) and Jindal Power will be severe as they have two coal mines producing 12 million tonnes a year.

For its plant in Angul, Odisha, JSPL had been allocated the Utkal 1B mine where investment is complete and production is due to start. The company did not comment on Court developments.

Hindalco Industries, too, needs captive coal to upgrade its aluminium smelter and bring down cost of production.

According to industry estimates, already 23,295 MW of capacity with ₹1,02,045 crore of investment is under pressure due to less coal supplies.

Of this, operational power plants with 2,350 MW of capacity and investments of ₹12,180 crore could have their coal blocks de-allocated.

A further 3,600 MW of capacity, which is under construction with an investment of ₹8,355 crore, may also have their coal blocks being de-allocated.