Coal deallocations may hike CAD by $700 mn: SBI

Sarkaritel
By Sarkaritel September 27, 2014 10:38

Coal deallocations may hike CAD by $700 mn: SBI


New Delhi, Sep 27  The Supreme Court’s deallocation of coal blocks may have a marginal impact on raising the net burden on the current account deficit (CAD) by an additional $700 million, according to a State Bank of India report Friday.

The CAD reflects the value by which goods and services imported by a country exceeds the value of goods and services it exports.

The SBI research report Ecowrap said most part of the likely rise in import bill owing to additional coal imports will be compensated by lower international oil prices.

During April to August 2014, the coal import bill reached $6.9 billion and may reach up to $24.9 billion during the current fiscal.

On the other hand, oil import bill would decline up to $7.8 billion this fiscal as oil prices are expected to settle around $98 per bbl, the report said.

Thus, the “net burden on CAD will be an additional increase of $0.7 billion,” it added.

It said the cancellation of coal blocks would impact power generation capacity, as well as the investment climate.

“After the cancellation of coal blocks, the government companies are not in a position to supply the required quantity of coal to power generation companies. Power stations have a supply of less than one week of coal and therefore there are possibilities of power outages,” the report said.

“Huge investments up to about Rs.287,000 crore have been made in 157 coal blocks as on December 2012 and the judgment will give a temporary setback to the investment climate,” it added.

Going forward, a swift and transparent bidding process for reallocation is needed, the report said.

The Supreme Court Wednesday cancelled 214 coal blocks allocated from 1993 to 2011, except four vested with the NTPC, SAIL and the Sasan Ultra Mega Power Project (UMPP).

An apex court bench granted six months breathing time to mining companies to wind up their operations in the coal blocks.

The court also imposed an additional levy of Rs.295 per tonne of coal extracted from exempted or operational mines.

Sarkaritel
By Sarkaritel September 27, 2014 10:38