The Supreme Court ruling, cancelling 214 coal blocks allocated since 1993, will adversely affect all companies whose mines have been de-allocated. The worst affected would be the ones which had already invested and started mining operations and their lenders.
Jindal Steel Power Ltd (JSPL) would be the hardest hit as three of its mines — Gare Palma 1 (operational), Jatpur and Utkal B1 both slated for production — have been de-allocated. Besides, JSPL is expected to pay a penalty of Rs.3,000 crore. Reacting to the SC ruing, JSPL stock plunged 15 per cent but closed with a loss of 10 per cent at Rs.189.70 on the BSE on Wednesday.
Others with operational mines such as CSES, Hindalco, Monnet Ispat, Prakash Industries and Usha Martin will be affected. Hindalco will be the least affected though three of its coal blocks — Talabira 1 (operational), Mahan and Talabira II coal blocks (both non-operational) — have been de-allocated. The company is expected to pay a penalty of Rs.350 crore.
“Hindalco is less affected. Apart from the penalty amount, the company will have to write-off the investment made so far. The SC ruling is negative. The market was expecting that the SC would impose a retrospective penalty and will allow companies already running the mines to retain the blocks. The loans that are outstanding will be a bone of contention,” said Ambareesh Baliga, independent market analyst.
Hindalco Chairman Kumar Mangalam Birla told shareholders in Mumbai that “There is a six months transition period and I am sure the government will have an action plan. We will wait.”
Hindalco stock, which plunged 8 per cent, recovered and closed with a loss of 0.48 per cent at Rs.156.30. Reacting to the SC ruling, the BSE Metal index plunged 4 per cent.
Tata Steel, Tata Power, Balco, JSW Steel and Nalco have also been affected.
“Tata Power had two coal blocks jointly allocated to it, along with others. We would look forward to opportunities of having a new, legally enforceable framework by which coal blocks could be awarded, perhaps at an early time,” Tata Power said in a statement.
The banking sector is also expected to suffer.
“We now look forward for a quick plan of action for ensuring that coal supplies are not disrupted and thereafter a swift and transparent bidding process for reallocation,” said Arundhati Bhattacharya, Chairman, State Bank of India.
“While the judgment may have been intended to bring in transparency, it will jeopardise the investments made in the sector. The government will need to expedite reallocating the cancelled producing blocks,” says Ajay Shriram, President, CII.
At present, about 42 blocks are producing coal to the tune of 53 million tonnes and account for 10 per cent of the total coal supplied in the country.
