Govt issues draft guidelines for coal auction, says blocks only for end-users

There will be a two-stage bidding for coal auction; prior allottees to be compensated

The Coal Minstry on Tuesday released draft guidelines for allocation of 74 coal blocks.

The Centre government plans to conduct two-stage bidding under the Coal Mines Special Provisions Ordinance. Qualified bidder in stage one would be asked to put in financial bid under an electronic auctioning process. The bidding would be open to specified end use projects in power, steel and iron, and cement sectors.

The tender documents, which are to be issued later. would specify the technical and financial qualification of participants in the auction. The Ministry of Coal today made public a set of draft rules under the ordinance.

Under the rules, the Centre plans to allow a successful bidder of coal mines to use coal from the mine allocated to it for any its other plant after prior intimation the government.

The rules also leave room for mines notified by the central government and figuring in Schedule 1 of the ordinance for allotment directly to power companies, which have bagged projects through competitive tariff route.

In the event that the successful allocatee is not the same as the prior allottee then the prior allottee would be entitled to compensation. Such compensation would be determined by the nominated authority, which has already been constituted by the ministry of coal. The compensation would be based on the written down value of the mine infrastructure in the statutory balance sheets of the company. Employees’ dues, payment to secured creditors and all revenue payment to the government would be given priority for disbursal of proceeds.

"The floor, reserve price metrics being worked out currently by authorities," Coal Secretary Anil Swarup said, adding that idea is to keep a lid on tariff rather than adopt a revenue maximisation approach. The reserve price will be determined before December 22, while the bidding fees will be based on geological reserves of coal mines, Swarup said.

The due date for coal auction is February 11. The Ministry hopes to complete technical process of allotment by March 3, 2015, and issue letter of award by March 16. 

 

The Supreme Court had in September cancelled 214 coal blocks allocated since 1993, saying the blocks had been given out in an ad-hoc and casual manner. 

The NDA government moved an ordinance late in October enabling auctions of some of these blocks. Finance MinisterArun Jaitley said at the time that an enabling provision would be made later to introduce commercial mining, which would open up the sector to mining companies selling coal to users. However, introduction of commercial mining will require changes to the Coal Mining Nationalisation Act, 1973.