Indian billionaires face fresh hurdles to mine Mahan coal

Date of publication: 
10 March 2014

Hindalco Industries Ltd. and Essar Energy Plc’s plan to mine local coal to feed their $3.8 billion Mahan aluminum smelter and power plants has stalled after local authorities said they will seek permission from villagers again.

The project in central India ran into controversy after Tribal Affairs Minister V. Kishore Chandra Deo alleged the companies used strong-arm tactics and forged signatures of local villagers to win agreement to begin mining. Hindalco, controlled by billionaire Kumar Mangalam Birla, and Essar Energy, run by billionaire brothers Shashi and Ravikant Ruia, need the coal to cut costs. Ramakant Tiwari, chief executive officer of the Hindalco-Essar mining venture Mahan Coal Ltd., has denied the minister’s claims.

“We would have village-level meetings conducted again as this has been highly debated,” M. Selvendran, the chief administrator of Singrauli in the central state of Madhya Pradesh where the mine is located, said in a phone interview. He said the meetings can take place after parliamentary elections conclude on May 16.

About 815 million eligible Indian voters will pick 543 lawmakers in nine rounds of voting from April 7 to May 12. Results will be announced on May 16. Loss of the mine will starve the projects of cheaper fuel, Anubhav Gupta, an analyst who covers the metals and mining sector at Kim Eng Securities Pvt. said in Mumbai.

“This is quite negative for the companies that have already made investments in the region,” said Gupta who has a sell rating on Hindalco shares. “Now the whole process is prolonged and there is uncertainty with respect to mining.”

Share Performance

London-listed Essar Energy fell as much as 6.5 percent to 70.15 pence and traded at 71.15 pence as of 12:05 p.m. local time. Hindalco shares rose 3.1 percent to 124.55 rupees at the close of trade in Mumbai. The benchmark S&P BSE Sensitive Index rose 1.9 percent to a record.

Mahan Coal, which secured approval from the environment ministry last month to mine coal, is seeking a mining lease agreement with the Madhya Pradesh government.