PSUs with coal blocks to get stake in mines

Mamata Singh & Jyoti Mukul / New Delhi May 18, 2005

The government is likely to allow public sector companies, which get coal blocks by being government-owned, to have a minority stake in the joint venture formed for mining.

The matter is likely to get a green signal from the Prime Minister's Office (PMO), as it will encourage the development of captive coal mines in the public sector.

The existing guidelines for blocks, given through the government company dispensation route, are silent on equity holding.

Both the coal and power ministries are in favour of allowing government-owned companies to retain only 26 per cent stake, and privatising the rest 74 per cent, though this will mean losing the public sector character.

The other route for allocation of captive blocks is through a screening committee. This is also the route taken by private companies.

If coal block was awarded to a company through the screening committee route, the successful operator was allowed to hold 26 per cent, while 74 per cent could be offloaded to some other company, officials said.

The matter came up for discussion after the National Thermal Power Corporation (NTPC) wanted to hold 26 per cent equity in the joint venture, for developing the Pakri Barwadih coal block in North Karanpura coalfields in Jharkhand.

The block was allotted to it last year. The coal ministry referred the matter to the law ministry,which was in favour of allowing NTPC to have less than 51 per cent equity, said an official.

The power ministry has asked NTPC to start production in the Jharkhand coal block by June 2007.

NTPC had been demanding captive coal blocks to ensure supply to its coal-based power stations. Nearly 82 per cent of its stations are coal-fired, while the remaining operate on natural gas.

Nine of the company's 13 coal-fired stations are located at the pit head. Of this, 7 are located within 25 km of the coal mine.

These stations are serviced by dedicated railway services, owned and operated by NTPC, ensuring greater security of fuel supply.

The company is attempting backward linkage into the fuel supply chain and in coal and gas business as well. It has also started importing coal to meet its demand.

Tapping captive potential

·  The move is aimed at encouraging the development of captive coal mines in the public sector

·  Both the coal and power ministries are in favour of allowing government-owned companies to retain only 26% stake and privatising the rest

·  The other route for allocation of captive blocks is through a screening committee