IMG wrestles with cons of coal block cancellation

Change of ownership at Veerangana Steels under scanner

The government’s high-level panel looking into the controversial coal block allocations for captive mining has decided against cancelling three blocks, given to Nagpur-based Shree Veerangana Steels.

This is despite the company facing the government’s ire for having allegedly sold its blocks by selling ownership of the firm, in violation of the norms. The inter-ministerial group (IMG) had in its review meeting on Wednesday recommended deducting the company’s bank guarantee but said the block should not be cancelled, due to the progress made by Veerangana in developing the reserves.

Deciding that the issue of ownership change was beyond its remit, the IMG said its recommendation of bank guarantee deduction was without prejudice to any other action that might be warranted on account of change of name and shareholding of Veerangana, said sources.

The government had allotted the Marki Mangli II, III and IV blocks to the company in September 2005. Veerangana later changed its name to Topworth Urja & Metals and merged itself with Crest Steel & Power.

In a letter in April 2012, the ministry told the company the furnished details showed there was no shareholder from the original allocatee, Shree Veerangana Steels, in Crest Steel & Power. “It appears that the entire management of the original allocatee company has been handed over to others who were not the original allocatees of the three blocks,” the letter stated. The coal ministry had, in May, threatened de-allocation, since this change of ownership was without its approval. The company then sent the shareholding patterns of Topworth Urja.

The ministry had clarified that the allotment of coal blocks was made for captive purposes and not for profiteering. The sale of Veerangana’s shareholding for profit defeated the purpose of such allocation, the ministry said.

The IMG is set to meet again tomorrow to discuss its review of six more coal blocks, done earlier this month, according to sources.

They did not disclose the names of companies holding these blocks.

The IMG, on Wednesday, considered the terms and conditions of allocation to Veerangana and the showcause notice issued to it. It also took into account the company’s reply on the delay in production of the blocks, along with the latest report on its development. Veerangana has commissioned the end-use plant to which the blocks were linked. The panel then decided to recommend bank guarantee deduction.

The three blocks given to Veerangana have combined geological reserves of around 57 million tonnes (mt). They are located in the Yavatmal coalfields in Maharashtra. In a review meeting this March, the ministry had found Marki Mangli-III block had started production but not attained the peak rated capacity.

So far, the IMG has recommended cancelling seven blocks. Its recommendations in four of these have been accepted by the ministry.

The seven blocks are held by JSW Steel, Bhushan Steel, SKS Ispat Ltd, Castron Mining Limited, Field Mining and Ispat Limited and DOMCO Smokeless Fuels Pvt Limited.