The Supreme Court order terming all coal blocks allocated between 1993 and 2010 as illegal as the allotment process lacked transparency has added to the uncertainty bogging the power and metal sectors.
The development has caused panic among companies which are likely to be affected. Those who have already made investments will be affected the most as compared to others who are yet to open the mines.
Jindal Steel and Power Ltd. (JSPL) and Hindalco Industries were likely to be affected the most, said analysts.
On Monday, JSPL shares closed with a loss of 14 per cent. Hindalco plunged 9.56 per cent to close at Rs.164.65 on the BSE. Tata Steel shares closed with a loss of 4.79 per cent. Reliance Power was down 4.07 per cent.
Officials of Aditya Birla Group of which Hindalco is a part were not available for comment. JSPL also preferred not to say anything. "We are not in a position to comment as we are currently evaluating the SC judgment and the implications for JSPL," a JSPL spokesperson said.
Unlisted companies
Among unlisted companies, Essar Power and Bharat Aluminum Company (Balco) are also likely to be affected. Balco had recently announced plans to extract coal from its mine and now with this development, its plans will be delayed, analysts said.
It is believed that companies which have already started production from mines may have to pay a fine for regularisation of their licences, and those yet to produce coal may end up either losing their licences or made to pay exorbitant price as per the market rate, they added.
"The impact will depend on the cost at which the power producers will source alternative coal. The power tariff will be under pressure and consumers may have to pay more for power. The companies which are into pure mining operation will suffer grievously as they will lose money and reputation," said Shailesh Haribhakti, Chairman, DH Consultants Pvt. Ltd.
The final outcome will be known only after September 1. The SC may appoint a committee that will decide what should be done and it may take time. Till that time, uncertainty will continue, and it would further confuse foreign investors.
"The judgment conforms to the findings of the Comptroller and Auditor General (CAG) on the coal mine issue. It is still not known whether the mines will be de-allocated or the beneficiaries will be let off by paying a steep fine. In any way, it is a negative for the companies in question," said an analyst tracking the power and metals sector.
The coal blocks, which were allocated to ultra mega power projects (UMPPs) on the basis of tariff-based bidding, will not be de-allocated, but the companies will not be allowed to sell coal commercially to third parties or transfer excess coal to other plants.
The apex court said such companies could only use the coal for power generation purpose. Going by this, Reliance Power's Sasan UMPP will be affected as the company was allowed to divert excess coal to its other project to be able to sell power at Rs.1.19 a unit. Now this project may be unviable. Reliance Power did not offer any comment.
However, some companies such as Adani Power and JSW Energy which fully depend on imported coal may benefit from this development as they could get some mines through fresh bidding process.
- Coal block allocation: chronology of events
- July 14, 1992
A number of coal blocks, which were not in the production plan of Coal India Ltd and the Singareni Collieries Company Limited (SCCL), were identified and a list of 143 blocks were prepared.
- 1993 to 2010
A total of 70 coal mines or blocks were allocated between 1993 and 2005, 53 in 2006, 52 in 2007, 24 in 2008, 16 in 2009 and one in 2010.
In all, 216 block were allocated between 1993 and 2010, out of which 24 were taken away at different points in time, effectively leaving the total number of allocated blocks at 194. - March 2012
CAG's draft report accuses govt of 'inefficient' allocation of coal blocks 2004—2009; estimates windfall gains to allottees at Rs 10.7 lakh crore.
- May 29, 2012
Prime Minister Manmohan Singh offers to give up his public life if found guilty in the scam * May 31, 2012: CVC, based on a complaint of two BJP MPs — Prakash Javadekar and Hansraj Ahir — directs a CBI enquiry
- June 2012
Coal ministry forms an inter—ministerial panel to review the process of allocation of blocks and to decide either on de—allocations or forfeiture of bank guarantees.
Since then, the government has taken back about 80 coal fields while bank guarantees in 42 cases have been forfeited. - August 2012
CAG's final report, tabled in Parliament, tones down loss to exchequer figure to Rs 1.86 lakh crore.
- June 2012
Coal ministry forms an inter—ministerial panel to review the process of allocation of blocks and to decide either on de—allocations or forfeiture of bank guarantees.
Since then, the government has taken back about 80 coal fields while bank guarantees in 42 cases have been forfeited. - August 2012
CAG's final report, tabled in Parliament, tones down loss to exchequer figure to Rs 1.86 lakh crore.
- August 25, 2012
Govt claims CAG's presumptive loss theory flawed, no mining yet.
- August 27, 2012
PM says CAG flawed; "The observations of the CAG are clearly disputable"
- September 6, 2012
PIL in SC seeks cancellation of 194 coal block allotments Supreme Court begins monitoring the CBI probe into the coal field allocations
- March 2013
The Apex Court asks CBI not to share probe details with govt
- April 23, 2013
Standing Committee on Coal and Steel, in a report tabled in Parliament, says coal blocks distributed between 1993—2008 done in unauthorized manner. Says allotment of mines where production not started should be cancelled.
- April 26, 2013
CBI Director Ranjit Sinha submits affidavit saying investigation report shared with law minister Ashwani Kumar.
- May 10, 2013
Ashwani Kumar resigns.
- June 11, 2013
CBI registers first information report (FIR) against Naveen Jindal and Dasari Narayana Rao.
- October 16, 2013
CBI files an FIR against industrialist Kumar Mangalam Birla and former coal secretary PC Parakh.
- July 2014
The Supreme Court sets up a special CBI court to try all coal field allocation cases.
- August, 2014
The CBI decides to close its case against Birla and Parakh.
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