THE BUZZ
Media reports from India said that the Inter-Ministerial Group (IMG) is set to recommend the de-allocation of some coal blocks that were previously awarded to private firms. 29 out of the 58 coal block allocations are under review, and further action is likely to be taken against any company found violating the regulations.
OUR TAKE
Not such a surprise. We expected the India government to make such a move, as there has been mounting political pressure on and criticism of the Manmohan Singh-led ruling coalition over the coal block allocation scandal.
The ‘Coalgate’ saga continues. The political debacle – which has been called “Coalgate” – involves the Indian government's allocation of the nation's coal deposits to government-owned entities and private companies without a legitimate bidding process in place. Things came to a head in July when the opposition, the Bharatiya Janata Party, lodged a complaint that led to a Central Bureau of Investigation probe into whether the allocation of the coal blocks was influenced by corruption. Since then, the Comptroller and Auditor General of India has claimed that „Coalgate‟ has cost the government a staggering loss of national income amounting to USD34bn.
Media reports from India said that the Inter-Ministerial Group (IMG) is set to recommend the de-allocation of some coal blocks that were previously awarded to private firms. 29 out of the 58 coal block allocations are under review, and further action is likely to be taken against any company found violating the regulations.
OUR TAKE
Not such a surprise. We expected the India government to make such a move, as there has been mounting political pressure on and criticism of the Manmohan Singh-led ruling coalition over the coal block allocation scandal.
The ‘Coalgate’ saga continues. The political debacle – which has been called “Coalgate” – involves the Indian government's allocation of the nation's coal deposits to government-owned entities and private companies without a legitimate bidding process in place. Things came to a head in July when the opposition, the Bharatiya Janata Party, lodged a complaint that led to a Central Bureau of Investigation probe into whether the allocation of the coal blocks was influenced by corruption. Since then, the Comptroller and Auditor General of India has claimed that „Coalgate‟ has cost the government a staggering loss of national income amounting to USD34bn.
Potential de-allocation. The IMG has put 29 out of a total 58 coal block allocations under review; of these, 27 have been scrutinised in the past fortnight. After reviewing all 29 allocations, the IMG will submit its recommendations to the Coal Ministry and Finance Ministry for further action. Some media reports have quoted sources as saying there could be a potential de-allocation for those which have failed to commence production within the prescribed timeline, as well as meting out punitive action like forfeiting bank guarantees for the other culprits.
Mudajaya at a slight advantage. Mudajaya‟s management has confirmed that its allocated coal block is not one of the 29 shortlisted for review. Even so, we believe that the coal supply issue in India is far from over. To our mind, the controversy surrounding the fuel supply agreements based on contracted coal requirements, the penalty imposed on Coal India in the event of a supply shortfall, as well as the uniform pricing of imported coal – all of which play a part in dictating the direction of India‟s coal industry - have yet to be resolved. Hence, we maintain our NEUTRAL stance on Mudajaya, with our SOP-based FV unchanged at RM2.88, pegged at a 50% discount to our FY12 valuation.
Source:OSK
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