Coal Ministry Denies Allotment Of Gare Palma Mine To JSPL On Low Valuation
JSPL’s bid price for Gare Palma mine doesn’t reflect the “true indicative value” of the block, said Coal Secretary AK Jain.
The government has denied allocation of a coal mine at Gare Palma, Chhattisgarh, to Jindal Steel & Power Ltd. citing low valuation, even as the Naveen Jindal-led company emerged as the highest bidder for the block at the recent auction.
JSPL’s bid price, though at a premium to base price, was lower than the coal ministry’s assessment of current market situation, Coal Secretary AK Jain told BloombergQuint. The bid price can’t be lower than what the block fetched in the first round of auction in 2015, he said in an emailed statement. The latest bid price, according to Jain, doesn’t reflect the “true indicative value” of the block.
JSPL has yet to respond to BloombergQuint’s emailed queries.
The steelmaker emerged as the highest bidder for the Gare Palma Block-IV/1 with a bid price of Rs 230 per tonne—a premium of nearly 53 percent over the government’s base price. Yet, the coal ministry made no mention of its allocation to JSPL in its notifications on Dec. 5 and Dec. 13 even as it awarded blocks to other successful bidders. The ministry, according to PIB, allocated three coal mines to other companies at a premium of 2-8 percent from the base price.
The Gare Palma Block-IV/1 has a peak capacity of 6 million tonnes a year and is located near Jindal Steel’s mill and captive power plant. The mine would ensure coal security for the next 10-12 years, VR Sharma, managing director at the steelmaker, had told BloombergQuint last month.
The coal block would also help the company save costs and boost its operating profit per tonne. The auction price of Rs 230 per tonne would roughly lead to savings worth Rs 800-1,000 per tonne compared with the e-auction price, according to the company. Coal India’s e-auction price available for the quarter ended June was Rs 2,155 a tonne.
But this isn’t the first time the mine’s allocation was denied. In 2014-15, Bharat Aluminium Company Ltd.—taken over by Vedanta Resources Ltd.—had emerged as the highest bidder for Gare Palma Block-IV/1. But the government had denied its allocation to the company, Vedanta Resources said in its 2015-16 annual report, without citing the reasons for denial.
During the same year, the government rejected JSPL’s bids for Gare Palma Block-IV/2 and IV/3 and Tara coal blocks on grounds that they didn’t reflect fair value.
Shares of Jindal Steel have declined nearly 11 percent since Dec. 4 when the issue came to the fore. Kotak Securities, in a note a month ago, had said winning the Gare Palma block at an attractive price was expected to add Rs 32-a-share value to the company’s stock price.