SC VERDICT ON COAL BLOCKS LIKELY TO TRIGGER REFORMS: S&P

The recent cancellation of coal block allocations by the Supreme Court provides an opportunity for the government to adopt a transparent process for awarding mines through auction, rating agency Standard & Poor’s (S&P) said in a report.

The apex court last week cancelled about 214 coal blocks that successive governments had allocated since 1993. It observed that the allocation was arbitrary, illegal, and resulted in unfair distribution of national wealth.

A transparent allocation policy will play an important role in determining the profitability and strategy of companies that consume coal such as those in the power, steel and cement sectors.

This combined with a streamlined process for getting environmental clearances and approvals for land acquisition would give companies the confidence to invest and revive long-pending projects, the agency said.

However, the cancellation increases the near-term uncertainty surrounding the operations and investment plans by companies. “It could also hurt the improved investor sentiment in India following the change in the government earlier this year,” said S&P credit analyst Mehul Sukkawala. The government could also extend the solution for coal miners to the mining of iron ore, bauxite, and other minerals. Doing so can help the country take a big step toward resolving issues plaguing the mining sector, the report said.

THE GOVT COULD ALSO EXTEND THE SOLUTION FOR COAL MINERS TO THE MINING OF IRON ORE, BAUXITE, AND OTHER MINERALS.