PSBs may take hit of Rs 96k cr due to coal block cancellation

Banks had extended credit to power plants based on coal supply from some of the mines cancelled by SC

Public sector banks may take a hit of Rs 96,484 crore due to cancellation of coal blocks to power projects, Minister of State for Finance Jayant Sinha said on Tuesday.

The Supreme Court had in September cancelled allocation of 204 coal mines since 1993 to power plants and other user industries after finding their allotment irregular.

Banks had extended credit to power plants built based on coal supply base from some of the mines cancelled by the apex court.

“The impact of cancellation of coal block allotment on public sector banks due to likely stoppage of production of power plants is estimated at Rs 96,484 crore,” Sinha said in a written reply to a question in the Rajya Sabha.

He, however, did not say if all the Rs 96,484 crore loan by banks to the projects may turn into bad debt if mining is stopped.

The Supreme Court had allowed companies to continue mining till March 31 in blocks where coal production had already started.

“According to information collected from public sector banks, the exposure of all PSBs to the power sector is Rs 5,82,469 crore,” Sinha said.

The government had last month promulgated an Ordinance for auctioning the 204 coal blocks whose allocation was cancelled by the Supreme Court. In that Ordinance, a provision was added for allowing commercial mining of coal by private companies.

The first lot of 74 mines will be auctioned to specific end-users in in early February.