UPDATES20th June 2012
STEEL, METALS AND MINING
COALCoal allocation was pro people : Sriprakash Jaiswal Coal Minister Sriprakash Jaiswal has defended Prime Minister Manmohan Singh on the issue of allocation of coal blocks saying the government had appointed an impeccable screening committee, and the top man cannot be blamed for possible misconduct at the lower level.
In a candid interview with ET, the minister gave glimpses of the government's strategy to deal with the coal controversy, and attacked critics such as Team Anna for shrugging off CAG's castigating reports on the affairs of Gujarat and Uttar Pradesh, and targeting coal block allocations, which Jaiswal argues was a pro-people move because an auction would have sharply raised prices of power, steel and cement.
A CAG report said that private companies made windfall gains of 1.86 lakh crores on account of a non-transparent policy for awarding coal blocks. The Central Bureau of Investigations is probing the matter after two BJP MPs Prakash Javedkar and Hansraj Ahir alleged that ineligible companies were awarded coal blocks and the government followed a faulty policy for award of mines. Jaiswal said the coal ministry was cooperating with the CBI and had deputed two officials to facilitate investigation.
Prime Minister Manmohan Singh had held additional charge of the ministry in UPA-1. An ally of the Congress party says that unlike 2G, the Congress cannot blame an ally for wrong doings in allocation of mines since the party has had control over the ministry during both terms of the UPA.
Jaiswal says the Prime Minister, who was officiating as the coal minister then, can only be held accountable on two counts- whether the policy formulated was correct and whether the formation of the screening committee was appropriate. "The screening committee had top representatives from different line ministries, chief secretaries of states and the head of Coal India. This was the best the government could do. Short of putting CBI officers on the committee every top official was a part of it," Jaiswal said.
"Now what can a minister do if something wrong happened at the lower level? The job of a minister is to formulate policy," he said.
Former coal secretary PC Parakh had written to the prime minister several times pushing for a competitive bidding process for the award of coal mines. Parakh had also stated that there was "political pressure" to allocate certain mines to some companies.
The PMO is battling allegations that it stalled the process of competitive bidding, a charge that has been denied by advisor to the PM TKA Nair to ET earlier. Jaiswal says the policy followed at the time, which was award of mines through recommendations by a government committee was the "right policy". Dismissing Parakh's statements of competitive bidding being the best possible option Jaiswal said the concerns of the government elected by people can differ from those of the bureaucracy. "If you ask a bureaucrat what decision should be taken on petroleum products, he would say stop all subsidies," Jaiswal said.
"But can a democratically elected government do that? If coal blocks had been awarded through a competitive bidding process, what would have been the cost of coal? It would have driven up steel, cement and power costs," he says.
The minister said coal allocation policy cannot be compared with the 2G spectrum scandal saying there is a world of difference between "dal-roti and mobile." The allocations were approved at every level before it came to the PM.
Attacking so called civil society activists, namely Team Anna, for raising the coal issue, Jaiswal said their motives were suspect because they only see scandals involving the Congress-led government. "The CAG has also given damaging reports on Gujarat and UP governments so why doesn't the civil society raise issues relating to state government?" he asked.
Indian coal mining scam - 64 coal blocks given to private firms under CBI scanner
The Central Bureau of Investigation has started looking into the allocation process of 64 coal blocks given to ‘private companies’ between 2004 and 2009.
The companies that bagged these blocks are spread across power, sponge iron, steel and cement sectors. Nearly 153 blocks were allocated in this period to both private and Government companies.
The CBI is understood to be reviewing the 64 blocks and their allotment procedures individually. Thereafter, the investigative agency will decide if an FIR needs to be lodged.
A Coal Ministry official said that at this moment, this cannot be called a probe as no FIR has been registered. The scope of the preliminary investigation is to find out if any fake company has been allotted blocks and whether the allocation has been according to Government norms notified in those years. If CBI finds evidence that fake companies have been allotted blocks through inappropriate procedures it will register an FIR. The investigative agency has already asked for documents from the nodal Ministry and has held ‘discussions’ with a few officials.
The official said that CBI has not met the Coal Minister, Mr Sriprakash Jaiswal. The actual probe would start only after an FIR is lodged. Till that time, CBI cannot search any premises arrest any company or Government official and quiz anyone. Nearly 153 coal blocks were awarded between 2004 and 2009 to both private and government companies.
Coal price hit intra year low
China thermal coal price started to head down after the completion of Daqin railway maintenance. Up to June 12, the average price of thermal coal with calorific value of 5500 Kcal/kg clocked in at 752 yuan per tonne, marking the sixth consecutive week of declines.
Currently, thermal coal market performance remains sluggish under the backdrop of high stocks in power plants and ports and sustained falls in oil and thermal coal prices in global markets.
Meanwhile, coking coal price cooled down. The markets in Shanxi province’s Changzhi and Linfen witnessed a fall of CNY 20-82 per tonne. Steel mills such as Chuanwei Steel, Panzhihua Steel and Wuhan Steel cut down coking coal purchase price.
Market sources said that steel mills intend to increase efforts to press down coking coal purchase price and strictly hold back refined coal purchases. As the steel market remains faltering, the coking coal market will continue to show lackluster performance.
CEMENTCement companies may face a rs 3000 crore fine for forming Cartels :
India's competition watchdog may slap a fine of about Rs 3,000 crore on top cement companies, ruling them guilty of forming a cartel and fixing prices, in an order expected in a few days, official sources said.
A top source in the Competition Commission of India (CCI) said the watchdog had the power to impose a fine of 10 per cent of the average turnover of a company in previous three years, but it would scale down the penalty as the economy was facing a slump and cement was a key input in critical sectors.
"Cement can affect market sentiments to a great effect. So, it was decided that we would impose a token punishment of 5-8 per cent of the past three years' average turnover to send a stern signal to the guilty companies without hampering market sentiments," a top CCI official told ET.
SHIPPING, TRADE AND TRANSPORTSesa Goa investors vote on Vedanta Merger
Concerns about operational hurdles and a large debt inherited from the aluminium business, dominated the extraordinary general meeting (EGM) of Sesa Goa on Tuesday, as shareholders of the iron ore mining firm cast their vote on the proposal to merge their firm with Vedanta Resources flagship Sterlite Industries and its various subsidiaries.
Results of the vote on the merger is being closely watched as it will create the world's seventh largest diversified metals and mining conglomerate. The result will be known on June 25. At least 75% of shareholders need to approve the merger for it to become effective. If approved, the restructuring will transfer a huge debt of about $14 billion on the largely profitable Sesa Sterlite, a key concern that was cited by institutional proxy advisories ahead of the EGM.
While debt on Vedanta will fall by about 61% to $3.8 billion, the move is also expected to shift losses from Vedanta Aluminium, one of the subsidiaries, onto the books of Sesa Sterlite.
"There were questions on Vedanta Aluminium and its impact on Sesa," said one group official. "Shareholders were concerned about the debt impact. The company board provided answers on the benefits of a diversified business as compared to a single business," he said, asking not to be named as he is not authorised to speak.
Sesa, India's largest iron ore exporter is currently grappling with a restricted mine production and high export duties, apart from slowing demand from a large consuming market like China. The Supreme Court-ordered ban on iron ore production in Karnataka and investigations into rampant illegal mining in Goa have restricted mineral production.
This is the second time that Vedanta Resources is attempting to restructure its corporate frame. The first exercise in 2008 was shot down by shareholders on the grounds that it was beneficial to the promoters and adversely affected minority shareholders.
Vedanta had earlier said that the merger will simplify the group's structure and cut costs. It will also bring down the debt servicing liability to $180 million, from $500 million. There would be a cost saving of 1,000 crore annually, Vedanta had said. Vedanta will conduct a similar EGM on June 21 to seek approval from shareholders of Sterlite Industries at Tuticorin in Tamil Nadu.
Shares of both Sesa Goa and Sterlite were down on the BSE on Tuesday. While Sesa Goa fell 3.01% to 177, and Sterlite was down 1.62% at 94.3. In comparison, the broader index was up 0.9%.
Post the merger, Vedanta will hold 58.3% stake in Sesa Sterlite. As per the scheme, Sterlite shareholders will get three shares of Sesa Goa for every five shares held. Cairn India, Hindustan Zinc, Balco, Vedanta Aluminum, Madras Aluminum, Talwandi Sabo Power and Australian Copper Mines will become subsidiaries of Sesa Sterlite after the restructuring.
Korean shipbuilding industry hit by global slowdown
THE mighty Korean shipbuilding industry has been crippled by the prolonged global economic downturn that has forced shipowners to cancel orders or request postponement of deliveries as they struggle to cope with the financial squeeze.
Shipbuilders say they have had to contend with a growing inventory of unsold ships, which were then put up for resale at below-market prices. This could trigger a vicious cycle wherein potential buyers demand a further reduction in vessel rates, industry sources said.
Requests for delaying delivery have also caused problems for shipbuilders, who have no choice but to entertain such calls to maintain a healthy relationship with clients.
As of late March, the global demand had dropped to 197 million Compensated Gross Tonnes or CGT, the lowest in six years. Analysts believe the European financial crisis could make the situation worse.