Last day of coal auction closes with record bid of 66.75% revenue share

This was from Sarda Energy & Minerals Ltd, which bagged the Gare Palma-IV/7 coal mine in Chhattisgarh

The last day of India's first commercial coal auction for private companies ended on a high note with a record bid by Sarda Energy & Minerals Ltd. The company bagged the Gare Palma-IV/7 coal mine in Chhattisgarh by quoting the closing bid of 66.75 per cent revenue share. This is the highest bid received in the auction which started a week ago with 19 coal mines and 42 bidders.

This is the second coal mine that Sarda Energy won in the current round of auction. The mine had several noted bidders in the fray including Adani, Jindal Power, Hindalco, JSW Steel among others. 

The Centre for the first time is awarding coal mines for commercial mining and sale to private firms. It amended the Coal Mines (Special Provisions) Act, 2015, in May to open the auction for non-mining, MSMEs and foreign companies. 

The two-part auction commenced last month when companies submitted their technical bids consisting of eligibility and initial price offer for 19 out of the total 38 coal blocks on offer. The second and final round of e-auction started last Monday.  According to the auction methodology the bid parameter is on ‘revenue-share’ mode. The participants bid for a percentage share of revenue payable to the state government from the production and sale of mined coal. The floor price is kept at 4 per cent of revenue share. Bidders place bids in multiples of 0.5 per cent of revenue share till it reaches 10 per cent and thereafter in multiples of 0.25 per cent of revenue share.

Pralhad Joshi, union minister for coal, said with a combined peak-rated capacity reaching 51 MT per annum, "it is expected that these 19 mines will generate a total revenue of Rs 6,636 crore annually." The revenue is paid annually to the host state by the miners over the life of mine. 

"While launching the auctions, it was broadly expected that investors related to mining, power and clean coal sectors would explore opportunities. But it is interesting to note that participants in the bidding process also include players from several other sectors like Real Estate, Infrastructure, Pharma, etc," Joshi said in a briefing. 

The minister claimed commercial mining will create an employment opportunity of 69,000 workforce, approximately. The minister said this estimation is based on the mining industry employment standard.

Among the winning bidders were Adani Enterprises, Hindalco, Vedanta ltd, Essel Mining of the Aditya Birla Group, Jindal Steel & Power ltd, and several new and non-mining companies such as Aurobindo Realty, Yazdani International, JMS Mining, and Boulder Stone Mart.

Coal ministry officials said almost 65 per cent bidders were from the ‘non-end user’ category i.e they are not direct coal users. 

Joshi said, about Rs 1,048 crore will come as upfront amount to the states from the auctioned mines. “More revenue will follow as soon as they operationalise these blocks,” he said, asking the states to cooperate.

Madhya Pradesh had the highest number of blocks on offer and witnessed almost 73 per cent success rate in participation of bidders. Jharkhand will receive the highest revenue amount of Rs 2,690 crore per annum from the auctioned blocks, said officials.