News Detail

The government has signalled its willingness to move ahead with a partial de-allocation of blocks, presumably to avert a full-scale cancellation by the Supreme Court on the lines of the 2G verdict. But while partial de-allocation could be politically less damaging, what would be the impact on investments and production?

Would INR 2.86 lakh crore of investments be affected?

The Supreme Court suggested to the government this month that it de-allocate coal mines where mining has not started. In response, the Attorney General said that INR 2.86 lakh crore of investment is at stake.

A close look at the government's documents, however, shows that a sizeable chunk of this investment is not linked to the coal blocks per se, but to coal-based power, steel and cement projects.
According to documents presented by the government in the Supreme Court, companies have invested INR 8,777 crore in their captive blocks and INR 2.77 lakh crore in the projects linked to these blocks. Within these investments, a large chunk has been made in the projects that are already operational.

According to the minutes of a coal ministry meeting in January 2012, of the 195 coal blocks that have been allocated since 1993, 47 have either come into production or were about to start mining. Of these 47 blocks, investment details are available for 30 blocks in the documents submitted by the government in the court. Altogether, the investments made in these 30 blocks adds up to INR 3,752 crore, which is nearly half (42.7%) of the INR 8,777 crore the government says companies have invested have invested in their coal mines.

The documents submitted by the government in the court contain investment figures for just 15 of the end use projects linked to these 47 blocks. But these investments alone add up to over INR 30,000 crore. Such investments will remain unaffected, if the de-allocation is restricted to coal mines that have not begun mining.

What is also significant is that the provenance of the INR 2.86 lakh crore number cited by the Attorney General. It comes from a document prepared by the Coal Controller's Office that collates investment figures made in 178 coal blocks until December 2012. This document states that the figures are "as per investment certificate submitted by block owners". In the apex court, the AG clarified these certificates have not been independently vetted by the government. The petitioners have argued in court that this puts the veracity of the figures in doubt. As it is, more than a dozen companies have already been booked by the CBI for submitting false information.

The petitioners have also brought several instances where investment figures seem highly inflated to the court's attention. For a sponge iron plant of 7.5 lakh ton annual capacity, Corporate Ispat has projected the cost at INR 511 crores. For a 120 MW power project, Utkal Coal Limited has pegged the cost at INR 593 crores. However, for a project of comparable size -- 135 MW power and 6.8 lakh ton sponge iron -- Bhushan Power and Steel Ltd claims to have invested INR 27,079 crore - 25 times the amount cited by the others. The company did not respond to emailed queries.

Source-On Request