Power stocks gain on govt's plans to auction coal blocks

Ten power stocks rose by 0.43% to 2.92% at 10:50 IST on BSE as 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.

Meanwhile, the BSE Sensex was up 160.63 points or 0.81% at 26,590.48.

Among shares of power generation and distribution companies, Power Grid Corporation of India (up 2.92%), Torrent Power (up 2.8%), JSW Energy (up 1.94%), Reliance Power (up 1.71%), Adani Power (up 1.44%), NTPC (up 2.82%), NHPC (up 1.57%), Reliance Infrastructure (up 1.52%), Tata Power Company (up 1.73%) and GVK Power & Infrastructure (up 0.43%), edged higher.

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.

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.

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