NTPC falls after Coal Ministry de-allocate three of its coal block

Stocks

oi-Shoaib MD

By Shoaib Md

Published: Friday, June 17, 2011, 12:36 [IST]

The coal ministry on Thursday issued orders to revoke mining licences of five coal blocks citing, the companies were non-serious about the development of these block.

Of these three blocks belonged to NTPC, and one each for Damodar Valley Corp and Jharkhand State Electricity Board with combined reserves being pegged between 1 billion tonnes to 3 billion tonnes.

The power ministry would take up the issue with coal ministry and higher authorities, a senior official said. Three of the five blocks - Chatti Bariatu , Chatti Bariatu (South) and Kerandari - belong to NTPC.

This news has impacted the stock price of NTPC on the negative side.

On conditions of annonymity the a senior official from the power ministry said the coal ministry would be persuaded to not de-allocate NTPC blocks. if necessary the matter will be taken to higher authorities, said the official. As of now the power ministry has written to coal ministry seeking review of the decision.

The NTPC officials cried foul and said they “Time schedule for development of captive blocks is 36 months if no forest land is involved and 42 months if forest land is involved".

One of the NTPC offical said that adjoining to these coal blocks in North Karanpura coalfield are far behind and still they are not in the de-allocation list.

Chatti Bariatu and Kerandari coal blocks were allocated to NTPC in 2006, while Chatti Bariatu (South) coal block was given to public sector firm in 2007. While Saharpur Jamarpani was allocated in 2007, Banhardih was given in 2006. The coal ministry had last month announced decision to revoke licences of 15 coal and lignite blocks, 12 of these belonged to state-run companies.

In letters issued on June 1 to three companies -- Bhaidyanath Ayurved Bhavan, Andhra Pradesh Power Generation Corp and Bhatia International -- five blocks were cancelled.

This move is on the recommendations of a review committee which checked the progress of coal blocks. The Original list of the panel had suggested to de-allocate 31 coal blocks held between 26 companies. The names include Tata Steel, NTPC, Hindalco and Nevyeli Lignite Corporation .

The de-allocated blocks would then be allotted to Coal India or its subsidiaries for mining.

Investor angle: While in the immediate this will give opportunity to sell NTPC. Maybe buying Coal India would be a better option. So that when the momentum hits the two commpanies it will gains on both the side of the trade.