Govt notifies draft approach paper for coal e-auction

Bid price based on Coal India rates, ceiling price for power sector

The government on Thursday notified draft rules for e-auction of cancelled coal blocks suggesting floor price for bidding and ceiling for power sector bidders.

Now there would be tariff based reverse bidding where the end use is generation of power and forward bidding for production of steel, cement and power generation for captive use.

In the draft approach paper released for comments from the stakeholders, the ministry of coal has also suggested the methodology for auction. The criteria for calculating the floor price for bidding would be based on Coal India’s price of coal for the same grade. There would be a ceiling price for power sector bidders to prevent shooting up of power tariff.

The potential bidders would have to pay upfront the floor price which is 10 per cent of the intrinsic value of the mine. This would be not less than Rs 150 per tonne. The bidder paying the highest floowr price would be the preferred bidder. The bidders would also pay the cost of land, mine infrastructure, leases, clearances paid by the prior owner. A notified authority will disburse this part of the revenue to compensate stakeholders in a mine viz labour, banks and financial institutions. 

The Central government also plans to conduct two-stage bidding under the Coal Mines Special Provisions Ordinance.After being eligible in the technical stage, top 50 per cent of the pre-qualified bidders would be allowed to participate in the e-auction and submit price offers.

For technical eligibility, the potential bidders would have to meet criteria of end-usage of coal, amount of coal needed for same, distance of end-use plant to the mine and the completion status of the same. This could translate into power, steel & cement projects which had attached captive mines getting it back, after payment of penalty.

The e-auction will take place in 69 days of issue of public notice regarding the same.

Making changes in the prior rules circulated for public comments, the government has mentioned that the successful owners would have to sell surplus coal, if produced from their captive mines to Coal India at the notified price. In earlier rules, it has allowed swapping/transfer of surplus coal for similar end usage.

In the first phase of e-auction, 74 blocks will be auctioned. The Supreme Court, on September 24, had ordered cancellation of allocation of these blocks — 42 operational and 32 in line to start production — with effect from April 1, 2015. These mines would now be offered only to developers with projects in notified end-use such as steel, power, cement and coal washing.