IMG skirts decision on coal block cancellation

Meeting in the midst of a raging controversy, an inter-ministerial group on coal blocks on Monday skirted a decision on cancelling allotments of 58 mines, but firmed up the guidelines for forfeiting of bank guarantees for failure to develop them.

Firms including Jindal Steel & Power, Tata Steel, Essar Power, ArcelorMittal, Sterlite Energy and Reliance Power will be asked to present before the IMG on September 6, 7 and 8 to explain the reasons for missing their production deadlines.

The IMG has firmed up the guidelines for proportionate deduction of bank guarantees for failure to achieve milestones for development of the blocks.

"The latest progress (on development of coal blocks) as reported by the Coal Controller will also be taken into account before recommending on the action against the coal block allocatees," an official statement issued after three and half hour long meeting of the IMG, said.

The panel would present its recommendations on the action to be taken in these 58 coal blocks to the coal secretary by September 10, sources privy to the meeting said, adding the panel did not discuss penal action like cancellation in respect of the 58 blocks under review.

The ministry is likely to announce outcome of the IMG deliberations by September 15.

Apart from the 58 blocks where unsatisfactory work had prompted the coal ministry to issue show-cause notices to the allottees, another 32 blocks would be reviewed subsequently.

Of the 58 blocks under review, 30 blocks were allocated to public sector firms and the rest 28 to private companies. The blocks given to private firms are estimated to hold 1,718 million tonnes of extractable coal reserves.

The IMG, headed by Zohra Chatterji, additional secretary, Coal, was set up in July to recommend action against the coal block allottess for not meeting time-lines set for beginning production.

The controversy over coal block allocation refuses to die down after the government auditor CAG estimated undue benefits to the tune of Rs 1.86 lakh crore to private firms on account of allocation of mines without auction.

The source said firms which were sitting on the blocks without doing any development stand to lose both the mines as well as bank guarantees. However, he did not specify any number.

A source privy to the meeting said IMG would recommend de-allocations on the basis of terms and conditions spelt out in the same set of guidelines on which mines were allotted.

"The government is not going to frame any fresh guideline on de-allocation. It would be done on the basis of existing terms and conditions," he said, adding a new guideline on bank guarantee was required to bring uniformity in the prevailing ones.

The government had changed the guideline for forfeiting bank guarantee after 2005 as it felt that the earlier one was not an encompassing one. The new guideline on forfeiting bank guarantee would soon be posted in the public domain, he added.

A firm allocated mine for captive use is required to submit a bank guarantee equivalent to one year's royalty, payable based on the final peak capacity of the mine.

Earlier, Coal Minister Sriprakash Jaiswal said the coal block allocation issue was being probed on two fronts -- one by the CBI and other by an IMG -- and that cancellation cannot be resorted to before the IMG gives its report.

Meanwhile, Opposition Bharatiya Janata Party asserted that it would allow Parliament to function only if all 142 coal block allocations made during the UPA rule are cancelled and a fair, impartial probe is ordered.

The proceedings of Parliament has remained stalled for the ninth consecutive day today ever since the CAG report on coal block allocation was tabled.