State-owned mining giant Coal India expects to recover around 75-80 per cent of its liabilities from customers with whom it has long-term fuel supply agreements (FSAs) after the Supreme Court (SC) allowed states to recover dues retrospectively.
However, a legal challenge is already underway.
“We are affected in two states – Jharkhand and Odisha. In Odisha, there will be a heavy hit of Rs 35,000 crore. In Jharkhand, the impact was Rs 350-400 crore, which is not a significant amount,” said PM Prasad, chairman and managing director of Coal India.
Between 75 and 80 per cent of the coal has been delivered to large plants with which Coal India has coal purchase agreements. “If I manage to get 80 per cent reimbursed, the impact will be Rs 6,500-7,000 crore, provided I can recover it,” Prasad said, on the sidelines of an interaction organised by the Bharat Chamber of Commerce.
He was explaining the impact of a recent Supreme Court ruling, which upheld the right of states to levy taxes on mineral rights and mineral-producing lands, and said arrears had been due to be paid since April 2005.
However, the payment of the arrears will be made in staggered instalments over 12 years starting in April 2026.
Odisha introduced the Orissa Rural Infrastructure and Socio-Economic Development Act, which came into effect on 1 February 2005 and which imposes a tax on land containing minerals.
Prasad said the company had gone to court in 2005 but had handed over the amount under protest within four months. After the state lost the case in the high court, it returned the money and Coal India, in turn, returned it to FSA’s customers.
However, although 75 to 80 percent of the clients were large and had operating plants, Prasad was not sure he could collect from the remaining 20 percent.
“FSA’s customers are large, existing plants, none of which are closed. But the remaining 20 percent is obtained through electronic auctions or road shipments to small players where collection is difficult,” he said.
While Coal India has calculated the impact, Prasad said the matter is still pending resolution.
He said a three-member tribunal will hear the review in the Supreme Court.
Coal India has seven coal producing companies. The impact of the Supreme Court decision on five coal producing companies was zero, Prasad said.
On price revision, Prasad said, “If we revise it, it will again affect the consumer.”
First published: August 23, 2024 | 20:10 IS
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