Govt may cancel coal allocations of Gondwana Ispat, two others

Gondwana gets time till October 28 to explain delay in development of coal block.

Nagpur-based coal miner Gondwana Ispat is the latest company, along with GVK Power and Bhushan Steel, to face the ire of the government over delays in development of a captive coal block allotted to it in Maharashtra.

In 2003, Gondwana Ispat was allotted the Majra block in Maharashtra for meeting the coal requirement of 480,000 tonnes per annum for its proposed sponge iron plant. Seven years after the allocation, the union coal ministry has issued a showcause notice to the company as important milestones including forest clearance, mining lease and land acquisition are still pending.

Through the notice, the ministry has given the company time till October 28 to explain why the delay in the development of coal block should not be held as a violation of the terms and conditions of the allotment, “failing which it would be presumed that the company has no explanation to offer and appropriate action would be taken against it for de-allocation of the Majra coal block”.

The company had assured production from the block to start by the second quarter of 2008. It later shifted the time of production to December 2009.

In a review meeting earlier this year, the ministry noted that there has been no serious effort by the company to develop the block. “It is seen that the company has repeatedly failed to keep its promises made on earlier occasions to this ministry and thus non-serious about the timely development of the block,” the showcause notice states.

Even on the progress achieved so far by the company to develop the block, like submission of mining plan and application of forest clearance, there have been slippages of periods from a few months to over two years.

Hyderabad-based GVK Power and Bhushan Steel and Power have been served similar showcause notices by the government threatening cancellation of their allocations.

GVK Power was allotted the captive block in Jharkhand in 2002 for supplying coal to a 500-Mw power plant proposed to be developed by it. However, there has been no serious effort by the company to develop the block and that critical milestones including forest clearance were still pending, the ministry has noted in its review meeting.

The company, however, attributes the delay to the lack of effective governance in Jharkhand. “There has been confusion over the land that was allotted to us. We had, on the advice of the Jharkhand government, deposited money for compensation for forest land. After this, the government found out that this land was not owned by the government. Now we are paying them for a different area,” said Pradeep Lenka, president and CEO of GVK Group.

The government has often cited ill-development of captive coal blocks allotted to several companies in the past decade as a major reason for the increasing gap in the demand and supply of coal in the country.

The current overall production of the dry fuel at 550 million tonnes annually, falls way short of the demand which is increasing at an annual rate between 10 and 30 per cent across different sectors. While the government has allocated more than 207 coal blocks so far, production has started from only 26 of them.