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Updated: September 13, 2012 02:07 IST

Defaulting firms will lose bank guarantee

Sujay Mehdudia
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Coal loaded wagons waiting at Bhubaneswar station for signal. A file photo: Ashoke Chakrabarty.
The Hindu
Coal loaded wagons waiting at Bhubaneswar station for signal. A file photo: Ashoke Chakrabarty.

IMG has shortlisted 18 mining companies for action under bank guarantee norms

Apart from facing de-allocation of coal mines in view of poor progress of work in the coal blocks allocated to them, defaulting companies will also be faced with a loss of their bank guarantees (BG) furnished by them at the time of allocation. The IMG has short listed around 18 coal mining companies for action under the guidelines for bank guarantee deduction.

The Inter-Ministerial Group (IMG) headed by Zohra Chatterjee have given a final shape to the Bank Guarantees guidelines which will now result in performance linked encashment of BGs furnished by these companies. The deduction of the bank guarantee will be on the basis of milestones achieved on ground and the rating given by the IMG for various works. The IMG has worked out a 100 mark index under which companies would be given marks for various milestones achieved like submission of mining plan and approval of mining plan which will carry the highest 10 marks each, application for forest clearance and land acquisition will carry 8 marks each and similarly other criteria like grant of forest clearance, obtaining of mining lease and so on.

The delay in developing of particular block could result in a deduction of bank guarantee to the tune of 50 per cent and if no work has been done then it could be both cancellation of the block and deduction of bank guarantee. The IMG has identified around 18 companies who have defaulted on various fronts and a decision on their bank guarantee will only be taken after proper scrutiny of their cases which has been done now by the IMG. “The IMG will now recommend to the Coal Ministry the necessary action in all such cases and then only formal orders would be issued for doing the needful,’’ a senior Coal Ministry official remarked.

The guidelines further state that where allocate companies have exceeded their normative date of production and there is no provision for bank guarantee related to development of coal blocks, the IMG may, only in cases where it finds that the company has made substantial progress and investment in development of the block even through they have exceeded normative date of production, recommend imposition of bank guarantee in addition to any other action. “The IMG, while making recommendations, will take into consideration the terms and conditions of allocation letter and the facts and circumstances of each case,’’ the guidelines state.

The documents indicating current status duly certified by the authorised representative (duly authenticated documents supporting the status shown may be kept available for the perusal of IMG, if required). Details of investment made vis-à-vis the planned investment in development of a coal block duly certified by the Chartered Accountant; Investment in respect of end use plant may be separately indicated with due certification; progress of implementation of end use plant and the latest status of the development of block/ end use plant prepared by the Coal Controller shall also be taken into consideration, the guidelines state.

The IMG had issued show cause notices to a nearly 58 companies including Reliance Power, Tatas, Essar, ArcelorMittal, GVK Power, Hindalco, Grasim Industries, JSW, Jindal Steel and Power Limited and Bhushan Steel. A total of 195 blocks stand allocated as on date and out of the above 30 blocks have started production and it is expected that 8 more blocks are likely to come into production during the year.

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