In a significant development, the Union coal ministry has annulled the allocation of the Banai-Bhalumunda coal block in Chhattisgarh to Sajjan Jindal-led JSW Steel. This decision comes as a result of JSW Steel’s failure to meet its financial obligations, specifically the non-payment of a performance bank guarantee worth approximately ₹1,000 crore. As a consequence, JSW Steel has also forfeited its ₹100 crore bid security.
The coal ministry’s nominated authority, in a 7 November order, stated that JSW Steel had consistently failed to adhere to the conditions outlined in the vesting order, including the crucial payment of performance security. The company had repeatedly sought extensions to comply with these conditions, delaying the crucial development of the coal block. It’s worth noting that fulfilling vesting conditions is essential for a company to gain ownership rights to assets or equity instruments under a share-based payment arrangement.
According to the Coal Block Development and Production Agreement signed on 29 March 2023, JSW Steel was obligated to submit a performance security of ₹1,060.98 crore and provide a completion notice by 8 May 2023. Despite numerous reminders and requests for documentary evidence demonstrating progress towards fulfilling these obligations, JSW Steel failed to meet these deadlines.
The company’s continued failure to comply with the terms of the agreement has raised concerns about its commitment to developing the coal block. The coal ministry, in its order, emphasized the need to safeguard public interest and ensure the timely development of the Banai-Bhalumunda coal block, which is vital for achieving India’s coal production targets. The ministry highlighted that JSW Steel’s consistent failure to meet its obligations had caused significant delays, hindering the commencement of production from the coal block.
The order, signed by additional secretary and nominated authority, Rupinder Brar, indicated that the block will now likely be put up for auction in upcoming rounds. This decision reflects the government’s commitment to ensure transparency and accountability in the allocation of coal resources.
It is noteworthy that the Banai and Bhalumunda coal blocks were initially offered separately, but due to a lack of investor interest, the government opted to auction them as a single block. The government’s move to annul the allocation to JSW Steel underscores the importance of adherence to the terms of agreements and the commitment to ensuring the timely development of critical resources for the nation’s energy needs.
