LS clears Bill to introduce open bidding for coal blocks

The Lok Sabha today approved an amendment in the new mining legislation to allow auctioning of coal blocks through competitive bidding. The amended Bill, passed in the Rajya Sabha earlier this week, is expected to bring transparency in allocation of coal blocks.

At present, a screening committee under the coal ministry approves allocation of blocks for both public and private sector companies. Sources in the ministry said introducing an objective and transparent system for allocation of blocks had become necessary as the number of applicants for captive coal blocks had been rising.

The proposal for auctioning coal blocks through competitive bidding by amending the Mines and Minerals development and Regulation (MMDR) Act was introduced in the Rajya Sabha in November 2008. It was referred to the standing committee on coal and steel.

The committee submitted its report to Parliament in February 2009 and recommended further consultations with the state governments. Later, most states supported the proposal. A draft note was placed before the Cabinet by the mines ministry. The Cabinet cleared the proposal in January this year.

However, the amended Bill, when it becomes an Act, will have limited impact on the sector. “Competitive bidding will not change much. The idea was mooted to discourage non-serious players and today there are hardly any non-serious players. It is only if the government allows private players to sell coal that every player will become serious and supply will increase,” said a highly placed government official close to the development.

He, however, added that competitive bidding would improve the allotment process. “In case of bidding, companies will have to give quotes for getting leases. At present, they are purely at the mercy of the government. This will end.”

A separate MMDR Amendment Bill to address the issue of illegal mining, primarily through setting up a regulator and special courts, is being discussed by a ten-member Group of Ministers headed by Finance Minister Pranab Mukherjee.