Cement, steel stocks gain on govt's plans to auction coal blocks

Thirteen steel and cement stocks rose by 0.28% to 5.43% at 11:30 IST on BSE on reports government will auction 74 coal-mining licenses to private companies in the next three to four months

Meanwhile, the BSE Sensex was up 147.15 points or 0.56% at 26,577.

Among shares of steel manufacturers, JSW Steel (up 2.59%), Tata Steel (up 2.21%), Steel Authority of India (up 1.27%) and Bhushan Steel (up 0.98%), edged higher.

Jindal Steel & Power (JSPL) rose 5.43% The company after market hours yesterday, 20 October 2014, in a clarification with regard to media news item titled "Coal Scam : CBI files fresh case against Jindal Steel" reiterated that all its actions are in keeping with the legal framework of the country & that the company complies with the law in letter & in spirit. JSPL continues to co-operate with all the authorities in a responsive manner, it added.

Among shares of cement makers, JK Lakshmi Cement (up 2.61%), J K Cement (up 2.22%), Prism Cement (up 1.59%), India Cements (up 3.22%), ACC (up 0.74%), Ambuja Cements (up 0.59%), Shree Cement (up 0.28%), and Jaiprakash Associates (up 0.67%), edged higher. UltraTech Cement was down 0.11%.

Grasim Industries rose 1.17%. Grasim has exposure to the cement sector through its subsidiary UltraTech Cement.

Coal Minister Piyush Goyal quoted by media as saying on Monday, 20 October 2014, government will auction 74 coal-mining licenses to private companies in the next three to four months. The government is reallocating hundreds of mining licenses after the Supreme Court last month canceled 214 coal licenses issued to private and public companies since 1993, saying the way they were given out was nontransparent and arbitrary.

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.

The government reportedly said it would promulgate an ordinance to resolve issues arising out of the cancellation of coal blocks. 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.

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, report added.

The winners of the coal block allocations would have to pay back previous holders of the permits for their investment with a 12% return, report added.

Coal is used in production of power, steel and cement. Steam coal - also known as thermal coal - is mainly used in power generation. Coking coal - also known as metallurgical coal - is mainly used in steel production. The cement industry requires energy to produce cement and coal is an important source of the energy used.

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