Firms that made huge investments should be given priority: Naveen Jindal

Interview with Chairman and managing director, Jindal Steel & Power Limited

With the Supreme Court (SC) cancelling captive coal block allocations, Jindal Steel & Power Limited will be the worst-affected company. It has three operating mines in Chhattisgarh with 12 million tonne capacity and six blocks yet to start production. Of this, one block for a coal to a liquid project had been de-allocated by the government. In an interview with Jyoti Mukul, chairman and managing director Naveen Jindal says the company was looking at legal options. Edited excerpts:

How do you perceive the SC order? As a company that will be impacted by the de-allocation, would you be seeking any legal recourse?

The order will adversely impact the investment climate in the country. We are engaging with our advisers to evaluate legal options available.

What is the back-up plan for the company?

The SC order has taken cognisance of submissions by the learned Attorney-General on behalf of the Union of India that if the coal blocks are cancelled, Coal India Ltd can fill the void and take things forward. Consequently, the court has given six months, till March 31, 2015, for effectiveness of the cancellation. We are confident the government will find a solution during this period so as to ensure the continuity of the coal supplies after March 2015, which is quite possible, given that these mines are already operating.

Do you think the imposition of Rs 295 a tonne penalty, which translates to around Rs 3,000 crore for your company, is justified?

The imposition of penalty is not justified at all. Even CAG (Comptroller and Auditor General) did not suggest the levy of Rs 295 a tonne. The CAG report clearly states that only a part of it could accrue to the government if the blocks were auctioned. Besides, Rs 295 a tonne has been worked by CAG based on the average realisation of Rs 1,028 a tonne during 2010-11 of all the grades of coal produced in open cast mine. The prices of F&G grades of coal were substantially lower at Rs 570 and Rs 430 a tonne, respectively, during the major part of 2010-11. Calculating the levy with respect to the average sales price of all grades of coal is highly unjustifiable. If at all, levy must be with respect to grade of coal in the allocated mines.

Applying levy of Rs 295 a tonne since 1993 based on financial information in 2010-11 is not justified since the coal prices were much lower in earlier years, eg. in 1996, the prices of F&G grade coal were Rs 257 and Rs 183, respectively.

What is your view on the stand taken by the government in this entire episode?

The government, on its part, did try to convince the court to regularise the existing operating 40 blocks and six blocks.

Six months down the line, when your company loses its producing block, what kind of compensation will you look for from the government?

We will urge the government to ensure that since these are producing mines, linkage of coal should be given to the respective companies from these producing blocks. Companies that have made huge investments over the years in setting up end-use plants should be given priority.