Privatisation of commercial coal mining? Far from it. Pulled up by the national auditor for allegedly bringing windfall gains of R1.86 lakh crore to a clutch of private companies through discretionary allocation of 57 coal blocks, the government is winding down even the existing facility for private companies to piggyback on public sector entities with commercial mining rights. All future public-private arrangements in the sector will be limited to private firms acting as a mine developer & operator (MDO) on behalf of state-run corporations, without any ownership rights.
There?s more. Private firms in existing public-private coal mining joint ventures also must divest their stakes in favour of state-run entities to ensure the latter holds majority stake.
The move will adversely impact the plans of metal and mining companies like Adani Mining, Moser Baer, Vedanta, Monnet Ispat and the Jaypee Group. All these companies either have joint ventures with state corporations/PSUs or are looking at forging such alliances.
Sources said the coal ministry wants mining leases given to state entities to remain with them. This would imply that several existing public-private JVs with 74:26 shareholding in favour of private companies must change to 51:49 in favour of government entities.
The review of norms is under regulatory pressure.
It follows the CAG’s indictment and adverse remarks made by the Parliamentary standing committee on coal and steel about non-transparent allocation of coal blocks to private entities.
It may be recalled that in its initial draft on coal allocations, the CAG had estimated the potential loss to the exchequer (same as the gains to the allocatees) at above Rs 10 lakh crore. Later, it was scaled down to Rs 1.8 lakh crore after excluding allocations to PSUs and underground mining ventures deemed unprofitable.
The Central Bureau of Investigation (CBI) has also widened its probe in the coal scam to look into such JV deals to ascertain whether the arrangement was worked out to favour some individual or business groups.
?Coal mines are given to government companies for commercial mining so that fuel demand from consuming industries could be met on a fast-track basis. Special dispensation in allocation of such blocks should not be misused to provide back-door entry to the private sector into commercial coal mining, which is currently reserved for the government sector, ? said an official privy to the development.
Under the revised terms and conditions for allocation of coal blocks to government companies, such entities will be offered the mine on payment of a reserve price decided by the coal ministry and after submitting a bank guarantee. The allocatee company will be allowed to use the services of the private sector entity as MDO but its selection would also have to through competitive bidding process. They will also be free to forge alliances with other state or central government companies or corporations.
Companies such as Monnet, Vedanta, Moser Baer, Adani and the Jaypee Group have forged JVs with mining and mineral corporations of Jharkhand, Chhattisgarh, Orissa and Madhya Pradesh for coal blocks allocated to these state entities.
