Coal ministry issues draft guidelines for block allocation

The Union coal ministry today issued a draft of the guidelines being framed for putting in place a competitive bidding regime for allocating coal blocks in the country.

Competitive bidding will replace the current practice of allocating blocks to the private sector for notified captive use based on recommendations of an inter-ministerial committee. The news system is expected to induce “transparency and objectivity” in the overall allocation.

The draft guidelines, framed after months of deliberations over the matter in an inter-ministerial committee headed by the Union coal secretary, present four models for selection of successful bidders during the multi-step auction process. The four probable models include upfront payment, production-linked payment, upfront payment with priority for development status of the end use plant and production-linked payment with preference for development status of the end use plant in the power, cement and steel sectors.

“These modalities have been worked out by us and put up for debate by all the stakeholders. Of the four models worked out by us, the model that is preferred most by the stakeholders will be finalised,” said a senior official from the coal ministry. “In the production-linked model, there will be a reserve price tag for coal on a per tonne basis, over the entire life of the coal mine. Further, a 20 per cent weight will be given in cases where significant development of the end-use project has taken place,” he added.

The common thread that runs through all the four options is the preference to be accorded to projects set up in the same state in which the mine is located. The ministry has asked stakeholders to give their views within 15 days, following which the widely chosen option would be taken for inviting competitive bidding for blocks.

Parliament in August last year passed the Mines and Minerals (Development and Regulation) Amendment Bill of 2010, which paved the way for introduction of auction of coal blocks through competitive bidding to private companies for captive use.