KOLKATA (miningweekly.com) - India’s National Aluminium Company (Nalco) has been slapped on the wrist by the Coal Ministry, which has directed the company to provide a $3.3-million bank guarantee for failure to develop a coal block allotted eight years ago.

An inter-Ministerial group (IMG) set up by the Coal Ministry to review the progress of all coal blocks allotted for captive consumption to government and private companies, considered the deallocation of the block granted to Nalco.

However, following presentations by the country’s largest integrated aluminium producer to the IMG, the Coal Ministry instead demanded the bank guarantee within three months, or the coal block would be deallocated.

In a letter issued to the Nalco chairperson and managing director, the Coal Ministry said “the IMG considered the terms and conditions of allocation, the 'show cause' notice issued and the reply along with the presentation made by the company.

“IMG noted that this was a fully explored block and more than eight years had lapsed since date of allotment. Nalco had applied for the block for its proposed captive power plant units in which an investment of Rs10.27-billion ($193-million) was reported. A further amount of Rs1.15-billion ($27-million) has been spent on the coal block,” the letter said.

“Taking into account all these factors, the IMG did not consider it appropriate to recommend deallocation of the coal block at this stage. However, in view of slippages in milestones, IMG recommends that the allocatee may be permitted to hold onto the coal block only on submission of a bank guarantee equivalent to one year of royalty for adherence to the milestones and failure of such would see the block deallocated,” the Coal Ministry letter added.

These recommendations by the IMG on Nalco had been considered and accepted by the Indian government, according to the Coal Ministry.

Nalco, which operates bauxite mines, smelters and a 960 MW captive power plant in the eastern Indian province of Orissa, had often been forced to shut down power generating units owing to coal shortages, which in turn resulted in the fall of production at its aluminium smelters of about 78 t/d.

Last year, the company claimed to be receiving only 7 000 t/d of coal instead of its full requirement of 12 000 t/d from Mahanadi Coalfields, a subsidiary of Coal India. In December, Nalco announced that it might have to cut back production by between 3% and 4% since coal procured through domestic e-auctions or imports was not viable for the company.

The Utkal-E coal block, located close to Nalco’s plants in Orissa, has an estimated reserve of 70-million tons.

Nalco operated a 4.8-million-ton-a-year bauxite mine, a 1.57-million-ton-a-year alumina refinery, a 345 000 t/y metal smelter and eight 120 MW captive thermal power plants, which were currently under expansion to deliver 1 200 MW.