Billionaire businessman Gautam Adani-owned Adani Group, so far perceived to be a major beneficiary of the Supreme Court's decision to cancel 214 coal mines, has actually emerged as one of the losers. It was widely believed that since companies would be forced to import coal following the cancellations, the Adani Group as, the country's largest coal trader and importer, would have benefited.
However, what is coming out now is a little-known fact that the Ahmedabad-based group had forayed into the back-end job of mine development and operations (MDO) with its subsidiary Adani Mining Private Limited in 2007 and had since bagged four major MDO contracts from coal mine owners; making it India's largest coal handler.
With coal licences cancelled, the group will lose access to over three billion tonnes of coal reserves with a production capacity of 110 MTPA and investments of close to $1 billion (Rs 6,000 crore) spent in developing these coal mines. Besides, it would also be a huge setback for the group's 2500 MW power plant in Orissa, which was to be set up for $2 billion. That's because the plant was based on the coal rejects from two of mines in the state, both of which got cancelled by the apex court.
The group's website says it has a stated mission to achieve a mining capacity of 200 MTPA of coal by year 2020, making it one of the largest mining groups in the world. This development may , however, have put paid to those plans for now .
The MDO contracts include all activities beginning from exploration to commissioning of coal mine projects. It comprises undertaking exploration, preparation of geological report and mine plan, seeking various statutory clearances, development of infrastructure, acquisition of land and R&R and setting up of washeries.
While the government awarded the coal blocks to various government and private firms, including the state mining corporations, for meeting the coal requirements of end-use projects in steel, power and cement sector, the Adani Group was happier working at the back end as an MDO. Since coal mine operators had no prior experience in the development of coal block and mining, they followed the MDO route by seeking competitive bids. The Adani Group incidentally bagged most of these contracts.
An Adani spokesman declined to comment. Even a text message sent to Adani failed to evoke any response. Confirming the development, a source in the know of the development told TOI, "Adani's MDO rights of Machakatta coal block and Chhendipada and Chendipada-II coal blocks in Orissa, Parsa block in Chhattisgarh, the Parsa East-Kente Basan mine in Chhattisgarh stand cancelled as these blocks were among 214 coal blocks cancelled by the apex court."
In April 2013, Adani Enterprises had announced the launch of its integrated MDO operations with the start of coal production from the Parsa East-Kente Basan mine in Chhattisgarh. The coal mine has reserves in excess of 450 million tonnes and was expected to produce 15 million tonnes of coal each year. This mine alone was being developed at cost of Rs 3,000 crore ($500 million). The Adani Group had estimated capital outlay of $2.5 billion or Rs 15,000 crore in developing the four coal mines through MDO contracts."With this development, Adani Enterprises is set to emerge as the largest private coal miner with access to produce coal of up to 90 million tonnes and reserves of over 3 billion tonnes over next 30 years, enough to produce about 18,000 MW of electricity by state electricity boards," the Adani group had said in a statement in April last year.
The other three MDO blocks contracted to Adani Enterprises are - Parsa block in Chhattisgarh, owned by Chhattisgarh State Power Generation Co with reserves of 150 MT, Machakatta block in Orissa owned by MahaGuj Collieries with reserves of 1.2 BT tonnes and Chendipada block, also in Orissa, owned by UCM Coal Company with reserves of 1.5 BT. All these blocks now stand cancelled leading to a loss of around $1 billion investments made in them so far.
Shares of Adani Enterprises gained 3% to close at Rs 484 in a firm Mumbai market on Friday valuing the firm at Rs 53,230 crore while shares of it power unit gained 5% to close at Rs 48, valuing it at Rs 13,756 crore.