Govt allocates 14 coal blocks to companies without reserve price

More than a year after gross irregularities in coal allocation surfaced, raising a storm of controversy, the coal ministry on Wednesday allocated 14 coal blocks with reserves exceeding 8,311 million tonne (mt) to power sector companies under the new Competitive Bidding of Coal Mines Rules notified in 2012.

The allocation would lead to an investment of Rs 1.6 lakh crore in the power sector, the coal ministry said in a statement.

The fresh allocations came around four years after blocks were last allocated in 2009. The 14 blocks have a production potential of 159 mt per annum and can fire upto 31,800 Megawatt (Mw) of power generation capacity. The reserves have been allocated to 15 state utilities and six central public sector undertakings (PSUs). This includes the largest power generator NTPC Ltd, which has been allocated four blocks with 1,995 mt reserves.

“A total of 318 applications were received in the ministry, of which 276 were found to be complete in all respects. Out of these, 235 applications pertained to 14 blocks for power. After scrutiny and verifications of facts and other important parameters, 128 applications were considered eligible for these 14 blocks for power,” the coal ministry said in a statement.

The statement was silent on the selection criteria used. The ministry had in December last year published a 30-point system for allocations. This included assigning the highest points for “preparedness of the plant” and “coal demand and supply gap in the state”.

Other criteria included “company’s financials” comprising  assessment of networth and turnover and the progress of development of blocks allotted in the past to the applicant company. Companies were also rated based on the location of the end-use plant.

Interestingly, the 14 coal blocks have been allocated without their reserve prices being worked out. “We had to do so because these are unexplored blocks.

Reserve price will be worked out and sought from companies after exploration is over. Meanwhile, we are taking an undertaking from the companies to this effect committing them to payment of reserve price later,” a senior ministry official told Business Standard.

The rules lay down that the Centre will identify coal-bearing areas and earmark them for specified end-use. This will be followed by fixing a reserve price for each block and inviting applications. For evaluation, the blocks were to be allocated by a committee headed by the coal secretary and comprising representative of other ministries.

The blocks have been allocated based on the recommendations of an inter-ministerial committee after discussions with the host state governments, applicant state governments and the power ministry. The largest of the 14 blocks, Deoca Pachami in West Bengal, has been allocated jointly to six states.