Cancellation of coal block may affect GDP growth: Ind-Ra
26/09/2014 11:53
India Ratings & Research (Ind-Ra), a part of Fitch Group, on Friday said that the coal block cancellation by the Supreme Court (SC) could adversely impact India’s nascent economic recovery. On 24 September, the Supreme Court (SC) cancelled 214 coal blocks allocated since 1993. However, it has allowed four coal blocks to continue operations. At the same time, the SC has imposed a levy of Rs 295 per metric ton of coal extracted till now by all cancelled block holders and this has to be paid by 31 December 2014. The coal extracted between 1 January 2015 and 31 March 2015 will also attract a levy of Rs 295 per cent metric ton. The SC ruling on coal blocks is similar to its earlier ruling of cancellation of 2G licences in February 2012. “While the SC ruling may help in cleaning the rot and could pave the way forward for a transparent system of selling natural resources; it will have an immediate effect on a number of stakeholders and also the overall economy,” the rating agency said in a press release. The impact of this ruling will be felt across various channels and lead to a rise in non-performing assets of the banking sector, an increase in the cost of coal and in turn a rise in power tariffs, pressure on current account and finally on overall inflation in the economy. Besides impacting economic recovery this could also pose challenges for the macroeconomic stability of the economy. While the ruling will have a direct impact on corporates with allocated coal blocks, the tremors will be felt on state governments as well, the agency added.
26/09/2014 11:53
India Ratings & Research (Ind-Ra), a part of Fitch Group, on Friday said that the coal block cancellation by the Supreme Court (SC) could adversely impact India’s nascent economic recovery. On 24 September, the Supreme Court (SC) cancelled 214 coal blocks allocated since 1993. However, it has allowed four coal blocks to continue operations. At the same time, the SC has imposed a levy of Rs 295 per metric ton of coal extracted till now by all cancelled block holders and this has to be paid by 31 December 2014. The coal extracted between 1 January 2015 and 31 March 2015 will also attract a levy of Rs 295 per cent metric ton. The SC ruling on coal blocks is similar to its earlier ruling of cancellation of 2G licences in February 2012. “While the SC ruling may help in cleaning the rot and could pave the way forward for a transparent system of selling natural resources; it will have an immediate effect on a number of stakeholders and also the overall economy,” the rating agency said in a press release. The impact of this ruling will be felt across various channels and lead to a rise in non-performing assets of the banking sector, an increase in the cost of coal and in turn a rise in power tariffs, pressure on current account and finally on overall inflation in the economy. Besides impacting economic recovery this could also pose challenges for the macroeconomic stability of the economy. While the ruling will have a direct impact on corporates with allocated coal blocks, the tremors will be felt on state governments as well, the agency added.
