With the Government formalising its stand on the coal block imbroglio, Jindal Steel & Power Ltd (JSPL), which has been in the news for all the wrong reasons recently, may have something to look forward to.
The President has given his nod to the Ordinance on e-auction of the recently cancelled coal block allocations. So, private power, steel and cement companies can hope to get back their de-allocated coal blocks for captive use.
While the exact details of the e-auction process – base price for bidding and other criteria – are not yet known, companies such as JSPL now have an opportunity to win back their captive mines.
Sure, there is no first right of refusal in the mine auctions, but the fact that the mines can be used only for captive purposes lends an advantage to the existing allottees. This is particularly true for JSPL, which has been using coal from its mines for its existing operations, unlike many others whose mines are still non-operational.
JSPL can bid for the Gare Palma IV/1, IV/2 and IV/3 thermal coal mines in Chhattisgarh, which feed the sponge iron plant and captive power plant at the company’s steel facility at Raigarh in the State and its subsidiary Jindal Power’s power plant at Tamnar in Jharkhand. The mines are estimated to have reserves of around 300 million tonnes, of which one-third is believed to have been mined so far.
Based on the average cost of about ₹1,300 a tonne, JSPL’s residual reserves could cost potential competitors a fortune and keep them away.
Also, given that captive coal mining makes sense only if the mine is located nearby, JSPL should have little competition in the bidding.