Mumbai : The Supreme Court’s decision that all coal blocks allocated during 1993 to 2010 by the government have been allocated illegally and arbitrarily, is likely to create overhang in the sector, according to a report.

“While it is difficult to quantify stock implications before the next course of action by the Supreme Court is known, we believe that the Supreme Court ruling would be an overhang on the sector in the near term,” Barclays said.

For JSPL, the apex court’s ruling not only creates uncertainty on profitability from existing operational coal blocks (Gare Palma IV/I /2/3) but also on the profitability of the USD 2.6 billion investment in the Angul Steel and Power project as the associated Utkal B1 block is unlikely to be allocated now, the report said.  For Hindalco, profitability of Mahan and Aditya smelters is to a large extent dependent on allocation of associated coal blocks (Mahan and Talabira-II), the report said.  Tata Steel’s Ganeshpur (thermal coal block) and Kotre Basantpur (coking coal block) allocation could also be impacted, the report said.

Meanwhile,  the Power Ministry has moved a draft Cabinet note to ensure coal linkages for power projects which are already commissioned or are likely to be commissioned by March. It follows Finance Minister Arun Jaitley’s announcement in the Budget 2014-15 speech that adequate quantity of coal will be provided to power plants that are already commissioned or would be commissioned by March 2015, to unlock dead investments.   The Supreme Court decision will ultimately benefit the country’s economy, Environment Minister Prakash Javadekar said.

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