Companies & Sectors
Supreme Court to decide future of 46 captive coal mines
Unless the governments, both at the Centre and State level, take these issues seriously and implement a uniform approach and policy over coal mines, we will continue to be in a mess
 
Only a couple of weeks ago, the Supreme Court declared that all the 218 coal blocks allotted were done, in every step of the way, illegally. Out of these, it appeared from the leniency plea made by the government that the Supreme Court may consider and spare 46 coal blocks, which were allotted as captive coal mines for various industries.
 
In his report, the Comptroller and Auditor General (CAG) had stated that the State Exchequer lost Rs1.86 lakh crore (or about $31 billion) because of the policy of giving away these coal mines to non-state companies, which prompted the Supreme Court to order an investigation by Central Bureau of Investigation (CBI).
 
The Court said that the allocation of coal blocks, which companies had won after competitive bidding process, was "legal" but these were meant to feed the designated power plants only. Thus, coal mined from these blocks could not be sold "commercially" or for any other purpose.
 
Out of the 46 blocks, actually 40 are producing about 45 to 50 million tonnes (mt), and if there are no impediments, production is likely to reach 53 million tonnes this fiscal year. The supplies are to power plants including the UMPP (Ultra Mega Power Project) at Sasan.
 
One question that may arise in our minds immediately is whether the owners of these captive blocks are also importing coal (or their imports may have stopped now), as they have captive mines at their disposal? If not, when do they expect to be self-sufficient from their own indigenous supply?
 
These miners, it is reported in the press, under the aegis of Coal Developers Association, have also begun legal consultation in case the Supreme Court's decision is not in their favour. However, the miners concerned feel that all the blocks awarded between 1993 and 2010 should be left with the developers!
 
These coal blocks are mainly located in Jharkhand and Chhattisgarh. Apart from power plants, others who would benefit, if the Supreme Court accepts the government plea, are the iron and steel and cement sectors.  During the current fiscal (2014-15), as mentioned above six more blocks are scheduled to go into production.  These are GVK Power's Tokisud North (reserves stated to be 92.3 million tonnes), NTPC's Pakri Barwadih (reserves 1600 mt) and DVC's Khagra Joydev (reserves 196.15 mt)
 
In a press conference, Power Minister Piyush Goyal reiterated that the government will ensure 24 x 7 power supply for all and, in fact, in the last 100 days, power production has increased by 21% as compared to the corresponding period last year.  In any case, plans are already set to ensure that Coal India reaches a target of one billion tonnes by 2019 from the current levels of 500 million tonnes. The government was also expediting the completion of rail corridors so that supplies could increase. Also to facilitate such speedy movement and to avoid shortage of rakes, Coal India plans to spend Rs5,000 crore in the purchase of 250 additional rakes.
 
In a separate press meet, Prakash Javdekar, the Environment Minister, is reported to have stated that his ministry was no longer a "speed breaker" and that they expect to be able to introduce the system of on-line submission of forms for clearance. They are working on a single-window clearance for projects and that there was "transparency and no discrimination, in project clearance," as “we do not even know who owns the project!"
 
In this scenario, what can one expect from the Supreme Court, which is fully aware of the power situation in the country? Would they take a lenient view of the government plea? We look at several possibilities:
 
a) The Supreme Court may direct the owners of the 40 captive, producing blocks to pay on an at a "cost" for acquiring the blocks to the government, at current market prices, including royalty and penalty; (no free lunch for anyone including government-owned companies!)
 
b) Owners of these blocks need to pay this up or surrender
 
c) In case of state-owned companies generating power, they should additionally make the power available at a cheaper rate, per unit, to the public; they shall also commit production targets and refrain from imports to ensure indigenous coal substitution
 
d) All these developers may have just "gone by the book to obtain these coal blocks", by the then government policy. They need now to give a sworn affidavit that they did not secure these in an “under the table manner”, so as to "retain" this illegal allocation
 
e) all the 46 captive mines need to formally commit an annual production from the mines so as to reduce dependence on imported coal
 
In so far as the balance coal blocks are concerned, the government may be allowed to auction them, with a specific condition that the successful bidder must be able to guarantee an agreed quantum of production from the time actual mining starts
 
The government can decide the pattern of distribution of these available blocks:
 
a) offer 50% of these to Foreign Direct Investors (who should bring in their know-how, technology including machinery)
 
b) offer 25% to various organisations in the power, steel, cement and other related industries, who have the capacity to start the mining operation in 12/24 months
 
c) balance 25% be offered exclusively to state operated enterprises, which do not have any blocks allocated so far, but with above conditions of production
 
To ensure that these actually bring about total increase in indigenous coal production and eliminate imports, the Environmental Ministry will expeditiously give clearance with 60/90 days of application.
 
Unless the government, both at the Centre and State levels take these issues seriously and implement a uniform approach and policy, we will continue to be in a mess.
 
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)

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United Spirits board to probe all loans given to UB Group companies
Diageo controlled United Spirits made provisions of Rs1,012 crore due to doubtful loans given to UB group companies, leading to the company reporting a full year net loss of Rs4,488.8 crore 
 
The board of United Spirits Ltd (USL), now controlled by Diageo, has ordered a probe into the loans given by the company to Vijay Mallya-led UB Group companies. These directions came as USL posted a widened net loss of Rs4,488.77 crore for the FY2014, mainly on higher provision due to the loans.
 
The company had reported a net loss of Rs105.03 crore in the fiscal ended March 2013.
 
USL made provisions of Rs1,012.75 crore for FY2014, due to ‘doubtful loans’ and exceptional items of Rs3,235.73 crore on the sale of Scottish subsidiary Whyte and Mackay.
 
While ordering the probe for a “detailed and expeditious enquiry on doubtful loans”, the company said: “The board has directed the Managing Director to engage independent advisors and specialists as required for the enquiry.
 
“Certain pre-existing loans/ deposits/ advances due to the company and its wholly-owned subsidiaries from United Breweries (Holdings) Ltd, which were in existence as on March 2013, have been taken into consideration in the consolidated annual accounts of the company drawn up as of that date.”
 
Pursuant to a previous resolution passed by the board on 11 October 2012, such dues (together with interest) aggregating to Rs1,337.40 crore were consolidated and recorded as an unsecured loan by way of an agreement between the company and UBHL,” the company said.
 
For the quarter ended March 2014, United Spirits reported standalone net sales of Rs1,916.95 as against Rs1,866.18 crore in the corresponding period a year ago. During the quarter to end-March, USL’s standalone net loss widened to Rs5,380.10 crore as against a net profit of Rs56.02 crore, same period last year.
 
The probe comes after UB Group Chairman Vijay Mallya was declared a wilful defaulter by State-owned United Bank of India. However, Mallya disagreed with the action of the lender and said he would pursue legal action.
 
“We were not given a hearing, we have not appeared before them, we disagree with their action and we shall pursue legal action,” Mallya told reporters after the annual general meeting of United Breweries.
 
The world’s largest spirits maker Diageo announced on 9 November 2012, that it will acquire 53.4% stake in United Spirits for Rs11,166.5 crore in a multi-structured deal. 

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COMMENTS

Sunil Pratap

2 years ago

End of the King of Good Times!!!!??

Merger deadline with BSNL pushes up MTNL share price
A note for the Cabinet's consideration will be drafted by April 2015 and the final merger is to be completed by July 2015
 
Mahanagar Telephone Nigam Ltd (MTNL) shares rallied on Friday to close 2.5% higher at Rs34.65, following the news about Department of Telecom (DoT) fixing 31 July 2015 as the deadline for the much awaited merger between state-run Bharat Sanchar Nigam Ltd (BSNL) and MTNL. However, this is still lower than its three month closing high of Rs38.20, which it hit on the 25 June 2014.
 
There have been long standing objections from employees of both companies to such a merger. The HR departments of both the companies will hold consulatations with the unions of BSNL and MTNL by March 31, 2015. 
 
A note for the Cabinet's consideration will be drafted by April 2015 and the final merger is to be completed by July 2015. MTNL for its part provides telecom services in Delhi and Mumbai, while BSNL offers services in the rest of the country. BSNL also owns over 60,000 mobile towers, the second largest tower-portfolio in India. Both state-run companies have been suffering losses due to increased competition from private players. 
 
MTNL closed Friday 2.5% up at Rs34.65 on the BSE, while the 30-share Sensex ended the day marginally down at 27,026. 

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