State clears air on OMC-Sainik Mining deal

Fearing de-allocation of the Utkal-D coal block allocated to Orissa Mining Corporation (OMC) over issues related to shareholding and delay in project execution, the state government has shot off a letter to the Ministry of Coal on progress made on the coal block.

OMC had entered into a joint venture (JV) with Delhi-based Sainik Mining & Allied Services Ltd (SMASL) for developing the coal block. While SMASL had 74 per cent stake in the JV, the state owned mining PSU held 26 per cent.

The equity pattern had drawn flak from the Ministry of Coal which had held OMC guilty of violating Coal Mines (Nationalization) Act, 1973 by conceding controlling stake to a private player for developing a coal block allotted to a state PSU. The ministry had issued a showcause notice to OMC in July 2010, urging the PSU to raise its stake in the JV to at least 51 per cent.

 

In addition to this, the ministry had also advised OMC to suitably modify the Memorandum and Articles of Association of the JV company.

In response, the state Chief Secretary B K Patnaik in a letter to Coal secretary Alok Perti has informed that OMC in its board meeting has decided to raise its equity in the JV company to 51 per cent from the existing 26 per cent.

"Before making the necessary amendments in the Memorandum and Articles of Association of the JV company, OMC is examining the agreement in detail, especially the commercial aspects of the pact for which due diligence is required. The due diligence is being conducted and expected to be completed shortly”, Patnaik said in the letter to the Coal secretary.

The Chief Secretary has further informed that OMC through the JV company has taken various steps to complete the pre-mining activities in respect of the Utkal-D coal block. With the exception of grant of Stage-II forest clearance, most of the major milestones have progressed satisfactorily.Land acquisition for the coal block area and purchase of private land for rehabilitation and resettlement (R&R) colony have been completed by June 2007. The coal block was awaiting Stage-II forest clearance the recommendation for which was sent by the state government to the Union ministry of environment & forests (MoEF) in January 2008.

OMC had obtained consent to establish from the State Pollution Control Board on November 20, 2007. Construction of the R&R colony with approach road and other basic amenities was completed in December 2010 while land acquisition for construction of private railway siding was completed in April 2011.