Supreme Court’s coal block ruling may cause further economic impact
A mass cancellation of coal blocks awarded since 1993 could cost India up to $3 billion in additional imports and hurt financial firms that have lent to the sector, broking firms said on Tuesday.
Apex court ruled on Monday that the allocation of more than 200 coal blocks at the centre of a cronyism scandal was illegal. The Supreme Court is due to decide on September 1 whether to cancel the allocations, or to impose some sort of penalty.
Shares in resource stocks fell further following a broad sell-off on Monday after the ruling, which jeopardised projects built around the blocks and threatens to exacerbate a shortage of the fuel.
“The ruling creates uncertainty and has to be resolved quickly. I hope the Supreme Court gives a clear roadmap in September,” said Samir Arora, a fund Manager at Helios Capital in Singapore.
Macquarie estimated in a note that complete de-allocation of the coal blocks would increase India’s import bill by $3 billion.
De-allocation could also impact financial firms, Credit Suisse said, with companies such as State Bank of India and Power Finance Corp Ltd lending some $10-$12 billion to the coal, power and steel sectors.
Macquarie urged investors to wait for more clarity to emerge.
India produced 565 million tonnes of coal in the year to March 31.
Source: economictimes
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