NEW DELHI: The government has removed roadblocks to coal mining by leading business houses and taken the first step to relax scrutiny of corporate expenditure on oil and gas fields, in a burst of action that has cheered investors and industrialists in the languishing energy sector.
A group of ministers recommended to the cabinet on Wednesday that Reliance Power’s Chhatrasal block, which is attached to the 4,000 mw Sasan Ultra Mega Power Project, and Mahan block for captive use by Hindalco and Essar should be given forest clearance, subject to some conditions. The projects have been mired in controversy after the Comptroller and Auditor General ofIndiasaid in a leaked draft report that the government had given undue benefits to private companies by handing out coal blocks, a charge vehemently denied by the coal ministry and Prime Minister Manmohan Singh.
Separately, the oil ministry announced it had set up a panel under C Rangarajan, chairman of the Prime Minister’s Economic Advisory Council, to review the production sharing contracts (PSC) with oil companies and suggest ways to minimise the government’s monitoring of expenditure by oil companies. ET first reported this on Monday.
The ministry also wants the panel to recommend guidelines on gas pricing and suggest a new mechanism for contract implementation instead of the current system in which nominees of the government and the regulator are nominated to the management committee of each block.
The current system effectively involves the bureaucracy in micromanagement of commercial operations, and has triggered disputes with companies such as Reliance Industries Ltd (RIL), which discovered a large gas field in theBay of Bengal.
The long-pending decisions in the energy sector, coming barely a week after state oil firms announced the biggest-ever increase in petrol prices despite concerns of inflation, has cheered investors fretting over policy inaction by the government.
A Balasubramanian, CEO of Birla Sunlife Mutual Fund, said the increase in petrol prices had signalled the government’s intention to take bold decisions. “One by one, they are clearing some long-pending things. These are sensible decisions. If they are able to implement in the true spirit, it will help in reviving investor confidence. There is a realisation that this is the time that certain steps have to be taken in the long-term interest of the economy,” he said. Industry officials said the Rangarajan committee could resolve the simmering dispute between Reliance and the oil ministry, which has refused to allow the company to fully recover its field-development cost from gas sales because output has fallen, prompting RIL to initiate arbitration. A source close to the company said the development was positive, but would depend on what action the oil ministry finally took. The ministry has adopted a tough approach towards RIL ever since the CAG accused it of being lenient with private firms.
Oil industry experts such as RS Sharma, former chairman of ONGC, welcomed the government’s action. “This shows the government is thinking in the right direction. It will boost global investors’ sentiment that government is taking action to resolve vexed issues with an open mind,” he said.
The GoM’s decision to recommend clearance of coal blocks will help Reliance Power generate electricity from the Sasan UMPP as well as the Chitrangi project, which would use surplus coal from mines attached to Sasan. It will also help Essar generate 1,200 mw of power and Hindalco to use coal for a smelter.
Officials said the GoM had recommended clearance of coal blocks subject to stiff conditions. “The GoM has recommended clearance to both Mahan and Chhatrasal blocks, but with strict riders on afforestation, corporate social responsibility (CSR) and compensation as recommended by the expert group,” Coal Secretary Alok Perti told reporters after the interministerial meeting.
The GoM, in its last meeting in March, had asked the ministry of environment and forests to form an expert panel to evaluate the impact of mining in the two blocks on the environment. The expert committee suggested clearances to both Mahan and Chhatrasal coal blocks with conditions on the companies to spend 5% of project outlay on CSR activities in surrounding areas.
A top government source said the environment ministry had expressed some reservations about the coal blocks, but these were overruled by other ministers. Association of Power Producers Director-General Ashok Khurana welcomed the GoM’s decision. “It is positive step. This will help stalled projects to come to operation quickly,” he said.