Metal and Power stocks gain on ordinance for coal issues

Shares of metal and power companies are trading higher by up to 2.5% after govt promulgates an ordinance on coal blocks.

Shares of metal and power companies are trading higher by up to 2.5% on the BSE after the government on Monday said it would promulgate an ordinance to resolve issues arising out of the cancellation of coal blocks.

 

Among individual stocks, Sesa Sterlite, Hindalco, NTPC, Tata Power and Tata Steel have gained between 1-2.5% on the 30-share Sensex. Meanwhile, BSE MEtal index is trading over 1% higher at 11134.71 levels.  

 

The ordinance will address issues related to coal supply to companies of central and state governments, as well as private companies in the cement, steel and power businesses. It will also address valuation of the land to be taken over from those who have lost coal blocks.

 

The government has cancelled coal blocks for companies like Jindal Steel and Power (JSPL), Hindalco, Usha Martin, Sarda Energy, Jayaswal Neco Industries, Monnet Ispat & Energy, GMR Infrastructure, Prakash Industries etc. which would be negatively impacted.

 

The coal sector has seen a logjam after the Supreme Court, on September 24, ordered the allocation of 204 blocks be cancelled. Unlike the current system, in which coal mining rights are allotted to actual users in some notified sectors, commercial mining will mean opening up the sector to mining companies selling coal to users.

 

For state-owned companies such as NTPC, as well as state electricity boards, coal mines will be allocated on a need basis. Mines will be allotted based on the per-tonne requirement of coal. Quashing any idea of de-nationalisation of the coal sector, the finance minister said the structure of Coal India would remain unchanged.

 

To kick-start the process, the 42 operational cancelled mines, along with 32 mines in different stages of production, will be put up for e-auction for actual users in the power, cement and steel sector. The e-auction process, the government hopes, will be completed in the next three-four months. The proceeds of all the auctions will go to the governments of states in which the mines are located. The major beneficiaries will be mineral-rich Jharkhand, Odisha, West Bengal and Chhattisgarh.