CBI conducts search operations at Mumbai, Delhi,
Bhubaneswar and Hyderabad
Coal scam: Kumar Mangalam Birla, ex-coal secretary named in CBI FIR
New Delhi: The Central Bureau of Investigation (CBI) on Tuesday filed a first information report (FIR) against Kumar Mangalam Birla, chairman of the Aditya Birla group, as well as Hindalco Industries Ltd in the case related to the allotment of captive coal blocks between 1993 and 2010.
“They have been booked for criminal conspiracy,” a senior CBI official said. “Simultaneous searches are going on at Mumbai, Delhi, Bhubaneswar and Hyderabad,” the official added, asking not to be identified.
An FIR has also been registered against former coal secretary P.C. Parekh.
The agency is investigating these allotments as part of a Supreme Court-monitored probe.
The new FIRs have been registered in connection with the allotment of the Talabira-II coalfield in Odisha that was allocated to Hindalco Industries in 2005.
A spokesperson for the Aditya Birla group said that the company had not received any FIR.
Coal field allotments became controversial after the Comptroller and Auditor General of India, the government auditor, estimated in a 2012 report that the nation had suffered a notional loss of Rs.1.86 trillion because of the allocation, rather than auction, of coal blocks.
The filing of the FIR against Birla and Hindalco “raises serious investor concerns as pending allocation of mines like Mahan and Talabira-2 could further get delayed for Hindalco”, said an analyst at a brokerage, without wanting to be named. The analyst said the CBI case can hurt the Aditya Birla group, too.
“Even their case for banking licence can weaken,” the analyst said, adding that he expects the Hindalco stock to drop 10-15% from its current levels.
Shares of Hindalco fell 3.8% to Rs.112.55 at 12:40pm on BSE, even as the benchmark Sensex gained 0.24% to 20,559.09 points.
A research report, authored before Tuesday’s CBI case, voiced concerns over the raw material availability that could hurt the company’s results.
“Depletion of reserves at the existing coal blocks and no guarantee on new linkages to ensure fuel security remain a recurring theme for its (Hindalco’s) Indian operations even as hopes ride high on Mahan coal blocks,” said a research report from Espirito Santo Securities dated 11 October that reiterated a ‘sell’ call on Hindalco’s shares, giving a fair value of Rs.90.
Mahan and Talabira 2 are two important coal blocks on which the timely implementation as well as the costs of two of Hindalco’s greenfield aluminium projects depend.
The Mahan aluminium project in Madhya Pradesh that includes a 359,000 tonne smelter and a 900MW power captive plant, has access to the Mahan coal block through a joint venture with Essar Power Ltd, the company’s website shows.
In the Mahan coal block, Hindalco has a share of 3.6 million tonnes of coal and this has received stage one clearance from the ministry of environment and forests, but it awaits stage 2 clearance before the joint venture partners can start production, the company’s website adds.
According to information taken from the coal ministry’s website, Mahan, with geological reserves of 144.2 million tonnes, was allocated to Hindalco and Essar in 2006.
At a press conference on 14 August for the announcement of the first quarter results, Hindalco’s top official expressed confidence in getting the approvals for Mahan coal block well in time.
“I would be very surprised if the clearance for stage II (from the government) does not come by December,” Debu Bhattacharya, managing director of Hindalco and vice-chairman of Novelis Inc.
, the company’s US unit, told reporters, speaking on the progress of the Mahan aluminium project where trial production has started.
This, he said, would help lower the cost of production at the Mahan aluminium smelter.
But Espirito Santo did not share the optimism.
“While the management remains positive on the Mahan coal block, we see its joint venture partner having a different view,” the Espirito Santo report says. “As per its joint venture partner Essar, the Mahan coal block will become operational only in the second quarter of FY15.”
The Talabira 2 coal block in Odisha, with geological reserves of 152.33 million tonnes, was allocated to Hindalco in 2005 in partnership with Mahanadi Coalfields Ltd and Northern Coalfields Ltd.
Talabira 2 is crucial for Hindalco’s Aditya Alumina and Aluminium project in Odisha where the company has investments in a 4.2mt bauxite mine, 1.5mt alumina refinery and a 359,000 tonne smelter which is “progressing well” and is expected to be commissioned in the second half of 2013, its website says.
Hindalco’s other coal mines include Tubed in Jharkhand, allocated in 2007 in a joint venture with Tata Power Co. Ltd
and Talabira 1 in Orissa allocated in 1994, the coal ministry data shows.