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Companies raise concerns on commercial mining rules, financing troubles

Leading mining, power, and metals companies raised several concerns in the upcoming auction of coal mines for commercial purpose at a meeting with the coal ministry. In the stakeholders' consultation held in Mumbai on Wednesday, several sector majors said seeking financing for commercial mining would be a major issue. "Investors told the coal ministry officials it would be difficult to get finance for bid security and upfront amount," said an executive, who was part of the meeting. The upfront amount to be paid by the mine developer would be 0.5 per cent of the value of estimated resources of the coal mine. Whereas, bank guarantee would be 20 per cent of the upfront amount in case of fully explored mine and 25 per cent in case of partially explored one.

The Ministry of Coal has released a probable list of 84 mines, which will be offered for auction. They have geological reserves of 22,360 million tonnes (mt). There are close to 10 mines with reserves of more than 500 mt. More the reserve, higher is the upfront and bid security amount.

Among the participants at the meeting were Tata Power, JSW Energy, Reliance Power, KSK Energy, Jindal Steel and Power, ACC, Ambuja Cement, Prism Cement, Hindalco, etc, said sources. Some state government-owned companies also participated in the meeting.

Private companies asked the coal ministry to provide a level playing field and efficient environment for getting clearances. "Private-sector companies sought a level playing field with regards to getting clearances, infrastructure for evacuation of coal and allied logistics, clarity on goods and services tax-related issues to encourage them to participate in the bidding process," said an executive.

Addressing the industry, the coal ministry officials said there will be incentives for early/excess coal production. "There will be no restrictions on the utilisation of coal," said the official at the meeting.

Participating companies, however, pointed out the issue of delay in getting clearances, which hampered the last round of coal auctions. In 2019, around 25 coal blocks were earmarked for auction, but the bidding did not happen due to lack of interest from the industry.

Several players highlighted there is no benchmark as yet for pricing the coal to be sold from these mines. The official said revenue-sharing and royalty payments to coal-mine-bearing states "will be on notional basis". The price of coal would be calculated based on the National Coal Index. The index is yet to be finalised.

Earlier this month, the Bharatiya Janata Party government at the Centre eased the qualification criteria and regulations for mining and selling coal in the country, thereby further easing the entry of foreign players and non-coal dependent companies in the coal mining sector.

The central government promulgated an Ordinance in Coal Mines (Special Provisions) (CMSP) Act, 2015, and the Mines and Minerals (Development and Regulation) Act, 1957, to introduce changes to the auction of coal blocks and their end-use relaxations.

Companies till now could participate in the bidding for coal blocks only if they had iron and steel, power, cement and coal gasification, and coal-to-liquid projects. The new set of amendments will also introduce more sellers of coal to India, which is currently only in the hands of state-owned Coal India. The Centre has also relaxed coal usage norms. Current private coal blocks owners would also be able to sell surplus coal in the open market.

 

The announcement comes four years after the Centre enabled commercial mining and sale of coal by private companies under the CMSP Act, 2015. A year later, it approved the methodology for auctioning coal mines for commercial purposes to private companies. In 2019, around 25 blocks were earmarked for auction, but the bidding did not happen.

BS

Commercial Mining Of Coal Set To Modernize Coal Sector

Vinod Kumar Tiwari, Additional Secretary, Ministry of Coal, Government of India, today said that commercial mining of coal will be a very important step in modernizing the coal sector in the country. Speaking at a stakeholder consultation on discussion paper of Ministry of Coal for 'Auction of Coal Mines for Sale of Coal', organised by the Ministry in partnership with FICCI, Tiwari said that the coal mining framework will also secure India's long-term economic growth.

Commercial coal mining and its associated competitive pressures will bring in new capabilities that will help all the organizations including the existing and also the prospective ones, he said. Private sector investments for commercial coal mines will also have a significant role to play in realizing Prime Minister Narendra Modi's vision of making India a $5 trillion economy.

Tiwari further said that commercial coal mining will help cater to the demand and supply gap of coal, a significant portion of which is currently imported. The Ministry will consider suggestions from stakeholders before finalizing the bidding process. Recently, Mineral Laws (Amendment) Ordinance, 2020 has been promulgated wherein end-use restrictions of the mining blocks have been removed and there is no barrier of prior experience for participation in the auction.

Budget 2020: Steel industry looks for duty protection

While the steel industry may have its own demands and wishes from the upcoming Union Budget, it will be more than happy if Finance Minister Nirmala Sithraman instead focuses on two industries - auto and infrastructure.

Both the sectors have been distress, and that has been a cause of worry for all steelmakers, including Tata Steel and JSW Steel. Car sales fell by 19 percent in 2019 and core infrastructure sectors shrank for the fourth straight month in November.

The data is of paramount importance for the steel sector because infrastructure sectors consume nearly half of the steel produced in the country while auto companies account for a little less than 20 percent.

While the Finance Minister in December had unveiled a Rs 105-lakh crore boost for the infrastructure space, the pundits will be keen to understand details on funding and break-ups. As for the auto sector, it remains to be seen if the FM gives them relief, especially on the GST front.

Any fillip to these two sectors will be a boost for the steel sector, which saw its growth rate further slump in November. JSW Steel, which recently announced its third quarter results, suffered a 88 percent drop in its consolidated net profits.

Though the companies have managed to increase steel prices in the last three months, and inventory levels are also down, the industry would need a boost from the Budget for demand to pick up from auto and infrastructure clients.

Specific demands

By itself, the steel industry is hoping for reliefs on duty side, from the Finance Minister.

"It will hugely benefit if the industry gets help in the form of reduced duty on the import of coking coal," said JSW Steel Jt Managing Director and Group CFO, Seshagiri Rao. "Also, border adjust tax should be brought in to protect the industry from cheap imports," he added.

The industry overall has in fact asked for  relief on imports of different kinds of coal frequently used in making different grades of steel. These are anthracite coal and coking coal.

The companies, and backed by industry body FICCI, have requested that import duties on both be reduced to nil, from the present 2.5 percent. This will help bring down the cost of production.

A border adjustment tax will help Indian steel companies gain parity against cheap imports. That is especially so, points out Rao, as steel companies pay a cess of Rs 400 a ton. The cess are of several kinds, including a clean energy cess.

Around 8 million tons of steel is imported annually, mainly from countries with whom India has signed free trade agreements.

 

Put together, higher demand from clients and lower costs will help steel industry manage its financials, well.

MC

Bidder JSW Steel a related party, can't be given immunity: ED to NCLAT MUMBAI:

The ED has told the appellate bankruptcy court that JSW Steel will not get immunity from the criminal charges being faced by Bhushan Power & Steel if it acquires the latter, because both are related parties. The agency also said that a Section under the Insolvency and Bankruptcy Code, which gives protection to the acquirer from prior offences committed by a bankrupt company, will not apply in this case since the provision was added to the law after lenders cleared JSW's proposal to acquire Bhushan Power. This provision under Section 32A, it told the court, cannot be applied retrospectively. JSW, which is seeking immunity from charges before going ahead with the deal, declined comment. Bhushan Power's former promoters are facing charges of financial irregularities and money laundering. In an affidavit filed in the National Company Law Appellate Tribunal, the ED said JSW and Bhushan Power are related parties through a joint venture. JV founded in 2008 The ED is looking into whether one party had helped the other in the alleged offences. JSW Steel, which has offered to pay over Rs 19,000 crore to acquire Bhushan Power, had sought to be excluded from regulatory and criminal probes against the target company under the watch of its erstwhile management. It has also sought exemption from attachment of the target company's assets. Last October, the ED had attached a factory of Bhushan Power in Odisha's Sambalpur. Subsequently, the attachment was released by the NCLT. The agency has challenged the order in the appellate body. In its affidavit filed on January 17, the ED said the relation between the two companies needs to be probed further. It said JSW Steel and Bhushan Power are shareholders, with stakes of 24.09% and 49%, respectively, in a venture called Rohne Coal Company. The agency said it wants to look at all the arrangements entered into between the two shareholders. Citing filings before the Ministry of Corporate Affairs, the affidavit said the joint venture company, founded in 2008, is "still in operation". On the application of Section 32A of IBC, included through an amendment in December 2019 to provide immunity to the corporate debtor and its assets from an offence committed prior to the commencement of the insolvency process, the ED said there is no provision that gives retrospective effect to the section. Ministry of Corporate Affairs sources is of the view that they cannot give a clean chit to anyone. In the ministry's affidavit, it is likely to explain the intent of the provision. "Section 32A is clearly worded, if investigation agencies have reasons to believe based on material facts, the protection will not be available. The MCA will merely explain intent of the provisions. We cannot give a clean chit to anyone," said a senior official. In its affidavit, the ED said the Section was introduced with effect from December 28, 2019, while JSW's resolution plan for Bhushan Power was approved on September 5, 2019. "The liability of corporate debtor shall not cease for the impugned offences under PMLA as the resolution plan… is not resulting in change in management or control of the corporate debtor to a person who was not a related party of the corporate debtor, for the reason that JSW Steel is a 'related party' of the corporate debtor, being an associate company which has formed a joint venture with the accused-corporate debtor," said the affidavit.