State mines make hay, private peers struggle in e-auction of coal blocks

Of 85 auctioned, 27 producing coal to the tune of 24.82 mt

The BJP government’s mega e-auction of coal blocks has seen mixed results with state-owned mines making hay while private companies are still languishing over regulations and legal cases. 

Of the 85 mines auctioned to private companies and allotted to states, 27 are currently producing coal to the tune of 24.82 million tonne. 

Of this, 13 are owned by private companies producing 8.44 million tonne and 14 by states producing 16.38 million tonne.

Government reports estimate that these mines were cumulatively producing 60 million tonne in 2014 when a Supreme Court judgment cancelled their allocation. Officials said these mines would reach the 2014-production level by end of this fiscal.

In 2014, the apex court struck down all coal block allocations made over the past two decades, thereby impacting operations of close to 200 mines. 

The ministry of coal started re-allocation during the same year through transparent e-auctions. It allocated 86 coal mines for own use to private companies through auction and to states through allotment – for both power and non-power sectors. The revenue estimated to be collected is Rs 2.85 crore over 30 years for the mine-bearing states.

Of the 85 mines re-allotted by the current government in 2014-16, 31 were auctioned to private companies and 61 allotted to states. Power companies participated in reverse bidding while non-power (steel, iron and aluminium) firms participated in forward bidding. Some of the successful private mine owners were Adani Power, JSW Energy, GMR Energy, Essar Power, Jindal Power, Jaiprakash Power, Hindalco Industries and Balco.

After the initial euphoria, a lot of private companies shied away from the coal block e-auction, after the first three tranches of auction. Officials said aggressive bidding in the initial round restricted many players from participating in later rounds of the auction. A lot of power companies quoted below Rs 0 to win coal blocks.

“Most of these power companies went to court after the ministry of power issued a directive disallowing them to compensate their low bid by raising power sale rates. In the steel sector, however, the demand did not come up as much as the initial rounds. We met most of their demands by announcing several rounds of auctions,” said an official.

While the private miners did not perform well, they helped state agencies boost their coal production by being their operators. Rajasthan, Karnataka, Punjab, West Bengal, Karnataka, NTPC and Damodar Valley Corporation are some states and public sector companies which received coal on allocation basis and at a concessional rate of Rs 100 per tonne.

Of the 61 mines which were allocated to state agencies, 32 issued tenders for the mine development operators (MDO). Some of the contractors included Adani Enterprises, Essel Mining, Dilip Buildcon and BGR Mining.

The Coal (Special Provisions) Act 2015 mandates transparent competitive bidding for awarding the MDO contract by states to private companies.

Industry experts claim the cost of coal from these MDO-operated, state-owned mines is 20 per cent lower than Coal India prices, because of “better and efficient practices.”

NTPC, which was allocated nine mines, closed last fiscal with close to 7.25 million tonne of production. The power generation behemoth is planning a separate company for coal mining soon. It has also appointed several MDOs at its mines, including Thriveni Engineering and Sainik Mining.

Facts in figures

204 mines cancelled in 2014

85 mines reallotted

24 auctioned to private companies

61 allocated to states/state agencies

24.82 mn tonne total production from 85 mines (till March 2019)

16.20 mt last year’s total production

8.44 mt from private mines

16.38 mt from state mines