Compensation model for cancelled coal mines settlement

The government will adopt a compensation model to settle claims of stakeholders in the coal mines whose allocation was recently cancelled by the Supreme Court.

The mines will be up for fresh bidding through the e-auction route.

The bidding amount, which the government is yet to calculate, will be segregated into two parts - fixed and variable. The fixed cost part will constitute value of land and other assets associated with a particular mine. The valuation committee, under Pratyush Sinha, former chief vigilance commissioner, is compiling the asset valuation data of all the mines with cancelled allocation.

According to the priority of disbursal of proceeds to the parties involved with the operational mines, the government will first pay the dues of the employees and then extend the payment to the secured creditors.

All the revenues, taxes and rates due from the prior allottee to the central or state government or local authority will also be paid off from the revenue earned as the fixed part of the bidding amount.

"The balance amount would then go to the prior owner of the mine as compensation," said a government official.

In what could be a trickle-down flow of compensation, rules for conducting the re-allocation of mines mentioned that any liability with regard to a matter specified in a lower category would arise only if surplus is left after meeting all the liabilities specified in the immediately higher category.

The other part of the bidding amount - variable cost - will be the reserve price of coal for which the government is deciding a methodology. It will be based on the geological reserve of the mine put for bidding. "This is the revenue which would go to the states where the mine is located," said the official.

The reserve price for the auction has not yet decided, with the government awaiting data on the value of assets and the formula under consideration.

Anil Swarup, secretary, ministry of coal, had earlier said the methodology of bidding would remain the same for all end-users in the cement, steel and power industries. But for projects that generate power under a pass-through mechanism, the government would formulate a cap on tariffs to keep electricity prices in check

In the first phase of re-allocation, 42 operational coal mines and 32 in line to start production will be offered to developers with notified end-use projects.

The government is looking to award the blocks by the end of February to meet the court's deadline. As per the rough timeline, coal ministry would try to issue 'request for proposal' by 22 December to invite bids, bidding procedure during mid-February and letter of allocation by at least 10 March.