Spectrum model for coal block e-auction

Re-bidding for 74 likely to begin in Dec; steps being worked out, transparency promised

The government is likely to issue at least a dozen sets of rules before starting the e-auction of coal blocks, promised under an ordinance of last week.

In the first phase, 74 blocks would be auctioned. The Supreme Court, on September 24, ordered cancellation of allocation of these blocks — 42 operational and 32 in line to start production — 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.

With the Coal Mines (Special Provisions) Ordinance empowering the government to work out the nitty-gritty, it would not need to wait for Parliament to replace the ordinance with a new law. The target is to start auctioning of blocks from December, said a senior government functionary. The process of notifying rules would take place along with the introduction of a Bill in Parliament, so that the way out of the impasse was not delayed.

To ensure legal and procedural transparency, the ministry of coal has planned an auction on the lines of what has been held in the past for telecom spectrum.

It has got in touch with the department of telecommunication for the expertise. Earlier, cancelled spectrum licences were re-allocated through a transparent e-auction process, visible on public domains.

“It would be a transparent process and we are looking to make the information publicly available. The whole point is to make the sector attractive for investors again and minimise the blocks,” said a senior government official.

The steps for a public auction are being worked on. It would include determination of a floor price, valuation of assets that would need to be transferred, collection of levy charges on the prior allottee and disbursement of compensation. And, the nominated authority in charge of the auction process would be empowered.

The rules would also look at transfer of operation and management of producing mines and use of coal by the successful bidder for notified end-use.

The SC judgment of August 25 had said the blocks' allocation process by a screening committee for 1994-2013 was ‘illegal’, ‘unconstitutional’ and ‘without application of mind’.

In the first step forward, a committee has been set up under ex-Central Vigilance Commission chief Pratyush Sinha to evaluate the value of the land in question and other assets. The coal ministry would decide the reserve price of coal on the basis of international market prices when the auction commences. It would amount to 10 per cent of the value of coal reserves in a mine.

Compensation to the prior allottee would be decided on the value of land and other assets which are part of the mining infrastructure.“The final bid amount would be a total of coal reserve price and asset value. After paying the compensation to the prior owner, the balance revenue would go to the states,” said an official.

The ordinance also provides an option for negotiation between the successful bidder and prior owner, for transfer of assets and mining infrastructure.

DOING IT BETTER
Government to design new model of e-auction, which will cover:

• Modality to conduct e-auction
   
• Criteria for selection of new bidders
  

 

Evaluation of land and other assets associated with the mine
 

Transfer/sale of mining infrastructure
 

Manner of providing agreements or arrangements for optimum utilisation of mined coal
 

Powers of the notified authority putting through the e-auction
 

Determination of compensation to the prior allottee of mine
 

Determination of floor price for bidding
 

E-auction to be on the lines of telecom spectrum re-allocation