Why leading steel cos are surrendering commercial coal blocks

Leading players in the Centre’s commercial coal auction are surrendering their mines to the government.

Business Standard has learnt that Essel Mining & Industries Limited (EMIL), Adani Enterprises (AEL), and JSW Steel are looking to surrender their mines.

Of these, AEL and EMIL have already notified the government.

AEL, in its latest annual report 2022-23, has said it has submitted a relinquishment letter to the Ministry of Coal for the Jhigador and Khargaon coal mines in Chhattisgarh.

“Mining projects at Jhigador and Khargaon coal mines are temporarily suspended.

"The group has been following up with the Government of Chhattisgarh and the Ministry of Coal for a grant of prospecting licence-cum-mining lease, without which it cannot proceed with the mining activities.

"Considering the delay in getting the said licence, the group has submitted a relinquishment letter to the Ministry of Coal and is awaiting response,” AEL said in its annual report 2022-23.

The Government of Chhattisgarh is reportedly not providing the mining leases to the coal block owners for mines in the state.

The state government also moved a resolution recently to get all those coal blocks cancelled, which are in the immediate vicinity of the ecologicially pristine forested Hasdeo Arand area.

It is also protesting the inclusion of coal blocks in the upcoming rounds in this area.

“The Chhattisgarh Assembly on July 26, 2022, had resolved the coal blocks in the Hasdeo area be cancelled.

"The coal ministry was informed about the resolution on September 19, 2022.

"I have been directed to inform the state government’s objection to the proposed auction of nine block blocks in the area,” said Jai Prakash Maurya, special mining secretary of the Chhattisgarh government, in a letter to the Ministry of Coal, informed reports.

AEL won the two mines of Khargaon and Jhigador in the second tranche of the commercial coal auction in 2021.

Both blocks are unexplored and have an estimated resource capacity of 250 million tonnes (mt) each.

EMIL is surrendering the Radhikapur (East) coal block in Odisha, which it won in the first round of the commercial coal auction in 2020, said senior officials in the know.

The government source did not reveal the reason. EMIL offered a 16.75 per cent premium against the floor price of 4 per cent to obtain the Radhikapur (East) coal block, which has an annual production of 5 mt per annum.

Despite being an explored block (faster to mine coal) and awarded three years ago, sources said no operations have commenced on it.

EMIL could not be reached for comment until the time of going to press.

The website of EMIL does not mention the said block under its current or future business operations in its last available financial statement on its website.

EMIL has mentioned it spent Rs 5.5 crore on preparing the geological report for the Radhikapur (East) coal block.

JSW Steel is looking to surrender the Banai-Bhalumuda coal block in Chhattisgarh, said government sources.

However, the ministry has not received any official word from the company as yet.

In a reply to emailed queries, a spokesperson for JSW Group wrote: “We prefer to not provide any comments regarding market speculation.”

Minsitry officials said, according to the bidding guidelines, all those who surrender coal mines without giving any satisfactory reasons will face the penalty of their bank guarantees being forfeited.

The person refused to comment, which of the above mentioned three players will face the penalty.

Since the launch of the commercial coal mine auction in June 2020, vesting or allocation orders have been issued for 49 coal mines, the Ministry of Coal said in a Rajya Sabha reply in April 2023.

Before that, the Centre launched the e-auction of the cancelled 200 coal mines; 43 mines were awarded for captive use (self-use) to 34 private players.