CBI already looking into coal block allocation

A day after the Centre virtually ruled out any probe into the allotment of coal blocks, it transpired the CBI is already looking into the allegations of wrong-doing in the matter.

"A reference has been received from the Central Vigilance Commission (CVC) with regard to complaints on allotment of coal blocks by the ministry of coal between 2006 and 2009. We are verifying the contents of the complaints. We will proceed further only after the verification," said a senior CBI official. 

The CBI verification assumes significance since the coal ministry was directly under Prime Minister Manmohan Singh during 2006 and 2009. Team Anna has alleged that arbitrary allocation of coal blocks was done during this period in a bid to allow certain private companies to make huge profits. 

According to CBI sources, the reference from the CVC reached the CBI a few days back. So far no preliminary enquiry or FIR has been filed in the matter. The complaint received has alleged that some private companies outsourced the coal blocks allotted to them in violation of government rules.

Besides the Team Anna, the Opposition is also gunning for the government on the issue. One of the complainants in the matter was BJP Lok Sabha MP Hansraj Ahir. "I had given a complaint to the CVC. The CVC has sent me an acknowledgment saying that my complaint is being looked into," said Ahir. 

Besides Ahir, BJP spokesperson Prakash Javadekar was another complainant before the CVC in this regard. 

To blunt the attack of Team Anna and opposition, the Prime Minister's Office had issued a clarification on Wednesday. The statement said: "The allocation of coal blocks to private sector companies is only for captive use and not for sale or commercial use of coal." 

It also clarified the coal blocks for captive end use were allotted on the basis of recommendations of a screening committee, which followed a transparent procedure giving equal opportunity to all applicants.

Source: Hindustan Times

Indian Panel Recommends Approval of Coal Blocks to Cabinet

A group of Indian ministers agreed to recommend approval of coal blocks allotted to Reliance Power Ltd. (RPWR) and a venture of Essar Energy Plc (ESSR) and Hindalco Industries Ltd. to the country’s cabinet, Coal Secretary Alok Perti said. 

The positive recommendation is a step toward ensuring coal supplies for power plants being built by the companies as Asia’s second-fastest growing major economy seeks to cut blackouts. A committee appointed by the environment ministry earlier recommended conditional approval for the blocks, which are located in forest areas. 

“Clearance for these projects has been long due,” Deven Choksey, managing director at Mumbai-based K.R. Choksey Shares & Securities Pvt, said by telephone before the ministers meeting. “The coal ministry and the environment ministry will have to work hand in hand if India has to meet its power demand.” 

The Chhatrasal block is one of three that will supply coal for a 3,960-megawatt project at Sasan being built by Reliance Power, controlled by billionaire Anil Ambani. The Mahan block, allotted to Essar Energy and Hindalco (HNDL), will be the source of fuel for generation plants with a combined capacity of 1,950 megawatts. 

Reliance Power plans to start the first, 660-megawatt unit at Sasan in December. Hindalco, India’s second-largest aluminum producer, formed a venture with Essar to develop the Mahan coal mine. Hindalco is planning a smelter in the state and expects to start mining a year after it gets permission, Managing Director Debu Bhattacharya said May 8. 

Environmental restrictions in India have led to delays in projects, leading to shortages of commodities, including coal and iron ore. The country’s annual coal output may rise 28 percent to 715 million tons in the next five years, lagging behind a 41 percent increase in demand to 981 million tons, according to Planning Commission estimates. 

Source: Bloomberg

Coal blocks allocation was not for revenue generation

Under attack from Team Anna, the Prime Minister's Office (PMO) issued a statement on Wednesday to clarify its stand on coal block allocation during the period 2004-2009.

In its press release, the PMO said that the clarifications regarding these issues had been placed on the website of the coal ministry on May 17.

Reiterating certain issues and giving further clarifications, the release says: "Allocation of coal blocks to private companies for captive use commenced in the year 1993 after the Coal Mines (Nationalisation) Act, 1973 was amended."

"This was done with the objective of attracting private investments in specified end uses... As the economy grew in size, the demand for coal also grew, particularly due to expansion in the energy sector. It was felt that Coal India Limited alone would not be able to meet the growing demand and, therefore, the option of giving a bigger role to the private sector was explored."

"While allocation of coal blocks began in 1993, it was only in 2004 that for the first time, the idea of making allocations through competitive bidding was mooted and in 2005 the government initiated a proposal to amend the Coal Mines (Nationalisation) Act."

"The delay of three years between initiating the process of legislative changes and introducing the amendment Bill in Parliament was mainly due to time taken in consensus building among divergent views of the various stakeholders. State governments such as Chhattisgarh, West Bengal and Rajasthan were opposed to the amendment," it states.

"Ministry of Power, too, felt that auctioning of coal may lead to enhanced cost of coal... The central government was always keen to quickly push through the changes. However, it could not have moved ahead without duly considering the concerns of various stakeholders."

"In the meanwhile, keeping in view the increase in applicants for coal blocks, the government evolved a consolidated set of guidelines to ensure consistency in allocation. In September 2005 the system was further improved bringing in greater transparency. In the improved system applications were invited through open advertisements against an identified list of coal blocks," it says.

"...it was felt that the required legislative changes would be time consuming... It would not have been prudent to disrupt the momentum of accelerated investments in coal sector, especially as it was felt that it would take time in bringing about the required legislative and the consequent procedural changes."

"If the coal blocks were not made available between 2005 and 2010, it would have resulted in higher imports causing outflow of foreign exchange and would have had deleterious effect on large investments in crucial sectors like power and steel... no coal block was offered for allocation after introduction of the Amendment Bill in Parliament," the release says.

"The allocation of coal blocks was never looked upon as a potential source for generating revenue for the central government. The intent of the government was to induce rapid development of infrastructure which was so very essential to keep the economy on a high growth trajectory. Hence the question of maximising revenue does not arise at all."

"The intent of the government was to involve the private sector to invest in identified infrastructure sectors in the interest of the country and its economy and, to this end; this developmental process was resorted to."

"The allocation of coal blocks to private sector companies is only for captive use and not for sale or commercial use of coal. Since the blocks are allocated to private companies only for captive purposes for the specified end-use, the question of linking the blocks to the market price/CIL price of coal does not arise at all," the PMO statement says.

"The coal blocks for captive end use were allotted on the basis of recommendations of a Screening Committee which followed a fair and transparent procedure giving equal opportunity to all applicants. The Screening Committee was a broad based body with representation from state governments at the level of the chief secretaries, concerned ministries of the central government and the coal companies," it adds.

"The process of allocation of blocks was equitable, fair and just which is borne out of the fact that there has never been any serious allegation against the working of the screening committee. The move to introduce competitive bidding is to make the selection process demonstrably more transparent," the PMO release concludes.

Source: India Today

Read more at: http://indiatoday.intoday.in/story/pmo-defends-coal-block-allocation-to-private-companies/1/198256.html

Euro Coal-Prices dip, China still re-negotiating

European prompt physical coal prices eased by up to $1.00 a tonne on Wednesday as the market, disconcerted by an unexpectedly high trade the previous day, seeks to gauge how bearish the new near-term outlook is.

China is still buying prompt coal cargoes at around $100 a tonne delivered but re-negotiating more, while Indian spot buying has almost dried up.

"Customers don't want anything now so we have no need to buy," one of India's biggest trader importers said.

The market is trying to work out whether Tuesday's trade at $90 for DES ARA - a leap of $5 from the most recent trade prior to that - was anomalous or a sign of strengthening. Players are looking for clear bullish or bearish signals and finding few of either.

"There's confusion at the front end, nobody seems very sure if the market's strengthening genuinely or is it just a move up on paper," a utility source said. South African prompt prices dipped by around $1.00 a tonne but remained close to $90.00 and were seen as fairly stable.

A July South African cargo was bid at $89.40 and offered at $91.00, down around $1.00.

News last Monday of Chinese defaults and price majeure - a coal market term for one party's refusal to honour a contracted price - on coal and iron ore cargoes gave the market a shock, although many players had been quietly re-negotiating prices for months.

"I don't know exactly how many cargoes have been defaulted on or had price majeure but it is a substantial number, we've heard of many cases recently," one European trader said.

Even suppliers who have sold indirectly to China, with Chinese counterparties as the ultimate buyer in a chain of trades, have experienced delays to loadings while haggling over prices has gone on.

Singapore-based traders Klandee are being pursued for losses after Chinese buyers defaulted on contracts in 2011.CMC, the marketing arm of Cerrejon, one of Colombia's two largest exporters, is seeking to recover the full price of a cargo cancelled in Q4 which was sold to Klandee and sold on to a Chinese buyer who defaulted.

Bulk Trading and Klandee are claiming and counter-claiming losses from each other after a different Chinese buyer failed to open a Letter of Credit to allow a South African cargo to load on time - it was delayed by 30 days.

But now the majority of prompt cargoes into China are being re-priced and taken by their original buyers or other Chinese buyers, at current spot prices, traders and suppliers said.

"I think you'll find that these Chinese cargoes will get washed out or absorbed, it's nothing to do with the economy cooling, it's the same price majeure a s ever when the market falls," another trader said.

Although China's utilities and handful of large, trader importers tend to buy on a prompt, spot basis, a large number of cargoes have already been sold for June and July delivery at prices far above current levels, suppliers said.

"I think you'll see more problems, more re-negotiation for the next two months even though at the same time we are seeing fresh demand - at current prices," another European trader said.

TRADES

A July delivery DES ARA cargo traded at $3.25 a tonne below API2 swaps on Wednesday, having traded at $90.00 a tonne or $2.50 below swaps on the previous day.

A June loading South African cargo traded at $1.10 above API4 swaps.

PRICES

An August DES ARA cargo was bid at $89.00, unchanged.

A July DES ARA cargo was bid at $84.00 and offered at $88.00, down $6.00 from Tuesday's traded level.

A July South African cargo was bid at $89.40 and offered at $91.00, down around $1.00. 

Source: Reuters

Govt caves in to coal blackmail

Governors in Kalimantan have shown their enormous power after the government caved in to their demand to supply more fuel following a massive blockade of a major coal transport route.

Energy and Mineral Resources Minister Jero Wacik told reporters on Monday that the government would add to the supply of non-subsidized fuels as an emergency response to the blockade at the Barito River in South Kalimantan.

However, Jero said, those behind the blockade would be prosecuted for meddling with national energy security.

Jero said he had consulted with four governors in Kalimantan and told them that the blockade could be perceived as a direct result of their previous threat against the central government.

The governors — Awang Faroek Ishak of East Kalimantan, Rudy Arifin of South Kalimantan, Teras Narang of Central Kalimantan and Cornelis MH of West Kalimantan — and other regional representatives previously sent a petition to the ministry threatening to terminate coal supplies from Kalimantan if subsidized-fuel allocations were not raised.

The petition was also sent to upstream oil and gas regulator BPMigas and to the House of Representatives.

According to the Ministry, Indonesia has an estimated 21.13 billion tons of coal reserves nationwide, and 83 percent of its proven reserves are in Kalimantan. The island is also the world’s largest exporter of thermal coal for power plants.

The nation’s coal production topped 371 million tons last year, up 34.4 percent over 2010.

In their petition, the governors demanded that the House increase this year’s quota to 3.46 million kiloliters, up 27.8 percent from 2.71 million kiloliters set in the 2012 revised state budget.

Before the governors could execute their threat, hundreds of activists started the blockade using small boats on Saturday.

The activists claimed to represent the interests of the people of Kalimantan who opposed the systematic exploitation of the central government. One of the nation’s most prominent environment activist groups, the Indonesian Forum for the Environment (Walhi), also took part in the blockade.

“Our motivation is driven by our concern toward the unfair distribution of energy resources — fuel and electricity — in South Kalimantan. We want the locals to have the utmost authority over their region’s natural resources,” Walhi member Berry Furqon said.

Jero said he would continue to discuss with the governors about how to end the blockade.

“With the blockade, the provinces lose a source of revenue. The disruption of coal deliveries will also cause blackouts in Java and other islands nationwide because coal-fired power plants will not get a sufficient supply,” Jero said.

Any decision to raise subsidized-fuel allocations should be approved by the House, which would take time as it would require an amendment to the state budget law. In the meantime, the central government would raise the non-subsidized fuel allocation, Jero said.

Separately, state power utility PT Perusahaan Listrik Negara (PLN) coal division head Helmi Najamudin said that for the time being the blockade would have no impact on PLN’s operations as the company had coal stocks sufficient for around 25 days.

“If the blockade goes on for the longer term, there will be massive blackouts in Java,” he said.

Satya W Yudha, a lawmaker on of House Commission VII overseeing energy, natural mineral resources, research and technology, and the environment, said that the governors had to produce verifiable data to support their argument for a larger fuel allocation.

“What really happened in Kalimantan is not just about subsidized-fuel scarcity but also about the misuse of the commodity. Most of the subsidized-fuel allocations in that region are being smuggled or are consumed by industries that are supposedly using non-subsidized fuels,” Satya said.

University of Indonesia energy expert Kurtubi, however, refused to blame industrial and mining companies for the chaotic situation in Kalimantan and instead pushed the central government to fulfill the demands of regional leaders for more subsidized fuel.

“Our quota policy is basically flawed. We set a quota of 40 million kiloliters for subsidized-fuel consumption this year but at the same time, we forgot that our quota last year exceeded 40 million kiloliters,” Kurtubi said.

Source: Jakarta Post