Govt hits a coal-block | business | Hindustan Times
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Govt hits a coal-block

business Updated: Sep 03, 2012 00:50 IST
Anupama Airy

There seems to be a clear divide within the government on the process being followed for de-allocating coal blocks. While the Prime Minister's Office (PMO) is pushing for speedy de-allocation of all such coal blocks where there is little or no progress, both finance and power ministries are not in favour of an across-the-board cancellation of blocks.

The coal ministry has set a September 15 deadline for de-allocating 58 coal blocks.

“There are many power, steel and cement projects under construction that have been allocated coal blocks out of these 58 blocks,” said a senior power ministry official.

Stating that all these projects had tied finances from banks or financial institutions (FIs) and achieved financial closure following allocation of coal blocks that ensure fuel supply to these projects, the official said both developers and banks are worried over their respective assets and funds turning into non-performing assets (NPAs) or bad loans following the de-allocation.

"Delay in development of coal blocks were not intentional…The problems included delay in various state and central government clearances besides law and order problems," official added.

While banks and FIs have approached the finance ministry, the affected project developers are approaching their respective ministries of power, steel and cement, highlighting the risk of their assets turning unviable.

One option is to replace these coal blocks with assured coal linkages but given the track record of coal supplies coming from state-owned Coal India Ltd (CIL), this too is unlikely to satisfy lenders financing such projects. “We have asked the coal ministry to look into these issues before taking any decision on de-allocating coal blocks,” the official said.

Show cause notices were issued in April following unsatisfactory progress by allottees of 58 blocks. Around 18-19 of these blocks are among those mentioned by the CAG in a report that projected undue benefits to the tune of Rs 1.9 lakh crore to private firms, said officials.