More than eight months after the government scrapped the controversial ‘no-go’ policy, which had banned mining in some areas, state-owned Coal India Ltd (CIL) is still struggling to operate its new projects located in the so-called no-go areas in the absence of a formal go-ahead from the environment ministry.

The delay is set to stem the miner’s efforts to meet new supply obligations, further aggravating the ongoing coal crisis in the country. “Since September last year, only two of our new mining projects have received clearance and, that too, outside of the no-go list.

The negligible penalty for supply shortfall set by state-owned Coal India (CIL) as a condition for committing supply to fuel-starved power plants is not the only reason why power companies have rejected the new model supply agreement. This has brought the government’s efforts to resolve the ongoing coal crisis back to square one.

A detailed analysis of the contentious clauses in the new fuel supply agreements (FSAs) reveal what the power companies are calling a “heavy tilt” in favour of the miner.

A parliamentary panel has pulled up the coal ministry for cancelling allocations to power companies without trying to address the issues that led to delays in developing coal blocks. The ministry had been acting like a big brother, trying to intimidate power companies for reasons beyond their control, the panel noted.

“Mere de-allocation of a block is not a solution, owing to the possibility of new allottees finding it difficult to develop these,” the parliamentary Standing Committee on Energy, headed by Samajwadi Party chief Mulayam Singh Yadav, said in its report on the availability of coal and gas for the power sector.

The government plans to empower the regulator being set up for the coal sector with the authority to decide pricing. The proposal, if implemented, would deprive state-owned Coal India (CIL) the freedom it currently enjoys in fixing and revising prices of its output.

“The regulator’s primary function would be to set the prices of raw coal. A note on the Coal regulatory Authority Bill, 2010, has been sent to the Cabinet,” said a senior coal ministry official. He, however, added the authority would not have the power to grant or cancel mining licences.

Producers say move shows CIL's attitude towards meeting fuel supply obligations

In a twist to the unending drama over coal supply, Coal India Ltd (CIL) has refused to supply to power plants commissioned since December 2011. The move is set to stall investment worth Rs 40,000 crore in new power capacity of 8,156 Mw. This includes a 300-Mw unit of Reliance Power’s Rosa power plant in UP and a 660-Mw plant of China Light & Power (CLP) at Jhajjar, Haryana.

The government’s decision to switch to a new royalty formula for coal would erode the benefit currently available to captive coal miners by way of reduced royalty rates. At the same time, it would increase state governments’ royalty collection multi-fold.

As captive miners do not engage in any sale, these currently pay royalty to states as a percentage of the sale price realised at the nearest Coal India mine. This arrangement benefits captive miners, as Coal India (CIL) prices are 70-80 per cent lower than those of international benchmarks.

In what belies the popular notion of a depressed investment environment in the country, the government’s spending on central sector projects commissioned in the first half of the previous financial year had risen exponentially, according to data obtained from the Ministry of Statistics and Programme Implementation (MoSPI).

In the central sector, India commissioned projects worth a record Rs 43,000 crore between April and September 2011-12, a whopping 250 per cent jump over the investment of Rs 17,835 crore in projects completed during the same period in 2008-09,

Industry wants quick SC intervention as the only alternative for survival

Seven months after the Supreme Court issued a detailed corrective plan for rampant illegal mining in Karnataka, until recently the iron ore hub of India, the viability of the Rs 45,000-crore steel industry in the southern state remains in question.

There is still more bad news for coal mining companies, with the mines ministry recommending that coal miners mandatory share 100 per cent royalty with project-affected families. The recommendation, if implemented, could severely dent coal miners’ bottom line.

It would not only increase the annual outgo of monopoly producer Coal India Ltd (CIL) on account of benefit sharing, but also bring captive block holders, including large companies like Tata, Reliance, Essar, GMR, GVK and Aditya Birla Group, under the benefit-sharing net.

Mineral-rich states saw no big benefit in commiting so much land and other inputs for the units

The Union government has scrapped its plan to promote Ultra Mega Steel Plants (UMSPs). Each plant was expected to have a capacity of 10 million tonnes per annum (mtpa). The idea was to give a big boost in the effort to meet burgeoning demand in Asia’s third-largest economy.