Tough coal policy to be soft on govt firms - Special dispensation to state-owned entities such as NTPC for development of captive blocks

The government would give a special dispensation to state-owned entities such as NTPC for the development of captive blocks under a new policy to be announced within a week, coal minister Sriprakash Jaiswal told FE in an exclusive interview.

The policy on development of captive blocks will, however, be tough on private sector companies who fail to adhere to agreed time-lines for development of coal blocks. Penal action for delays could be as harsh as deallocation of the blocks, the minister said. The new policy will categorise projects into three categories;one,wherecoalblock development process is genuinelyslow;two,wheresmall progress has been made; and three, which made some progress but unable to move further due to genuine problems such as delay in land acquisition or other statutory clearances. "There will be no relaxationforthefirstcategory where the captive coal block will face immediate deallocation.Forothers,wewill take a considerate view to ascertain the reasons for delay andtakeappropriateaction," Jaiswal said. The new policy will impact about 93 companies having captive coal blocks which have reported inordinate delays in production.

GVK Power, Bhushan Steel, Tata Steel, Monnet Ispat and Arcelor Mittal are among the companies under scanner. The production from captive coal blocks allocated since 2004 is about 36 million tonnes (mt) at present.

The ministry reckons that if the companies make full use of these blocks, the output could be augmented in a couple of years to over 200 mt, which is roughly a third of the country's total coal output this fiscal.

There is a widening gap between the demand and supply of coal, leading to a surge in imports. The minister said imports are a costly option, but inevitable and rate of growth of import bill could be as high as 50-60% a year.

Coal imports in the current financial year could be about 83 mt, up from 72 mt last year. Jaiswal said other penal actions that the errant captive coal block operators could face would be partial to total encashment of bank guarantees.

Country's largest power producer NTPC and other state sector generation utilities will get special reprieve under the new policy as government will give them extra time to report "substantial progress" in captive block use.

"This is required in the national interest and considering the special challenges faced by these PSUs," said the minister.

Earlier, companies such as NTPC have approached the power ministry citing reasons for delay in developing their captive blocks and sought extra time. Between October 2004 and July 2007, NTPC was allotted eight blocks with a peak production capacity of 83 million tonne per annum. This is sufficient to fuel power generation capacity of over 18,000 MW or 11% of the country's total generation capacity.

None of the blocks given to NTPC has come under production so far.

The company has recently hastened work on all the blocks and is expected to bring Pakri Barwadih block in production by 2012.

The government is going hard over the development of captive coal blocks as part of the strategy to enhance coal production and bridge the wide demand-supply gap. These blocks have been identified as an alternate way to increase the country's coal production.

Coal production from the captive blocks is required to commence within 36 months (42 months in case the area falls under forest land) of the date of allocation in opencast mine and in 48 months (54 months in case the area falls under forest land) from the date of allocation in underground mine. In case of most of the notices issued by the coal ministry, the allocation was done in 2006 or earlier.