It proposes that CIL supply coal to power projects

To check the adverse impact of a possible cancellation of the coal blocks allotted to companies that have failed to fulfil the norms for making them operational by March 2013 and prevent a “fuel crisis,” the government proposes to hand over all cancelled blocks to Coal India Limited (CIL).

This view has emerged even as the Inter-Ministerial Group (IMG) on coal blocks met on Monday to take a decision on the 58 blocks that have been issued show-cause notices and advisories.

The IMG met to review the show-cause notices and possibly recommend cancellation of blocks that were not likely to produce coal by March 2013, due to a lack of progress.

An internal note of the Coal Ministry suggests that 60 blocks — seven allotted during the NDA regime and 53 allotted since UPA-I, having a reserve of 6.7 million tonnes as cited by the Comptroller and Auditor-General (CAG) — could be cancelled and handed over to CIL for immediate development as the allottees have not concluded land acquisition.

To compensate the regulated sectors (power plants) which have been set up on the basis of these blocks, linkage from CIL could be granted and a fuel supply agreement signed as per the policy, the note says. This will ensure that the developers are not affected and investments in end-use plants are not stranded. The other sectors always retain the option of participating in competitive bidding for coal blocks or importing coal to meet their needs. A similar exercise could be carried out for 20 underground blocks.

Under the allotment rules (and as specified in each of the allotment letters), the timeline for development of mines is only 42 months, or three years and five months for the open cast mines having forestland. For almost all of these blocks, this time has elapsed. There are three major milestones in the process of development: prospecting licence (for unexplored blocks); forest clearance, which takes 48-60 months as per the Ministry’s estimates; and land acquisition.

“Paradoxical situation”

In a related development, a parliamentary committee has expressed unhappiness over the allocation of coal blocks to private firms — most of which have failed to develop them — instead of to CIL. Its observations prompted the government to say that 116 mines would be allotted to the state-owned company. “A paradoxical situation is arising…, wherein the coal blocks are being allocated to private parties, most of which are failing to develop [them]… in a stipulated time frame, whereas CIL is vying with foreign players in the international market to acquire coal assets to meet its requirements,” the committee said in its report tabled in the Rajya Sabha on Monday.

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