Coal ministry cancels allocation of Chhattisgarh coal block to JSW Steel

New Delhi: The Union coal ministry has annulled the allocation of the Banai-Bhalumunda coal block in Chhattisgarh to Sajjan Jindal-led JSW Steel over non-payment of a performance bank guarantee worth around ₹1,000 crore.
As a result, JSW Steel has also forfeited ₹100 crore bid security submitted by the company.
In a 7 November order, the nominated authority of the coal ministry said that JSW Steel failed to comply with conditions after the issuance of the vesting order, including payment of performance security or performance bank guarantee and had been seeking an extension of the deadline to comply with the conditions.
Vesting conditions need to be fulfilled for the counterparty to become entitled to receive assets or equity instruments of the entity under the share-based payment arrangement.
Under the Coal Block Development and Production Agreement signed on 29 March 2023, JSW Steel had to submit the performance security of ₹1,060.98 crore and a completion notice by 8 May 2023. However, it has failed to provide the required guarantee and documents so far.
The order copy said: “The Nominated Authority, through emails dated 09.05.2023, 10.05.2023, 16.05.2023 and 19.05.2023, requested documentary evidence demonstrating the steps taken towards meeting these obligations.”
It further noted that in May last year, JSW Steel had requested to be allowed to surrender the block due to site issues, including an NTPC MGR Railway Line and the Pajhar River crossing the block. Again, in a representation dated 9 June 2023, JSW Steel said that it is in the process of appointing Central Mine Planning & Design Institute Ltd (CMPDIL) to carry out the techno commercial feasibility study of the coal block and requested that no coercive action be taken against it till such study is concluded by CMPDIL.
“In line with the vision of Atmanirbhar Bharat and the coal auction’s implications in supporting this vision, a grant of two-week extension was given to JSWSL till 07.07.2023 [7 July 2023]. However, despite this extension, no substantive progress was made regarding compliance with the Vesting Conditions,” the order said.
The order signed by the additional secretary and nominated authority, Rupinder Brar, said the decision has been taken to safeguard the public interest and ensure the timely development of the coal block, which is critical for achieving the nation’s coal production targets.
“The continuous failure of M/s JSW Steel Limited to meet its obligations has caused undue delays, obstructing the commencement of production from the coal block, which cannot be further tolerated,” it said.
Queries sent to JSW Steel remained unanswered till press time.
Banai and Bhalumunda coal blocks were initially offered separately; however, amid lack of investor interest, the government eventually put them on auction as a single block.
Last year, state-run power generation major NTPC had sought annulment of the allocation of the Banai-Bhalumunda coal block to JSW Steel, The Economic Times reported. These mines were earlier with NTPC to be developed for captive use.
The power producer had requested permission from the coal ministry to merge these two blocks, which was not allowed, and NTPC subsequently relinquished these mines in 2020.
However, the coal ministry in November 2022 offered the coal blocks for auction as a single block.