Govt notifies draft rules for e-auction of coal mines

The government today came out with draft rules for e-auction of 92 cancelled coal mines in the first phase, fixing a floor price of Rs 150 per tonne for sectors like steel, sponge iron, cement and captive power.

This paves way for auction and allotment of 204 coal blocks that were cancelled by the Supreme Court in September.

"In order to conduct the auction of coal mines in accordance with the Coal Mines (Special Provisions) Ordinance, 2014 and the rules framed thereunder, the Authority (Nominated) is required to prepare a tender document.

"Accordingly, an Approach Paper to the tender document has been prepared for public consultation," the government today notified.

The Coal Ministry has sought comments from stakeholders by December 22.

The government said coal mines shall be earmarked for different end-use sectors and allocated through a competitive bidding process of e-auction.

"The e-auction may be conducted on forward/reverse basis, depending on the end-use industry. Applications will be sought from intending companies in these sectors for pre-qualifications and only the top 50% of the pre-qualified bidders... Will be allowed to submit their bids," the Ministry said.

The government said there shall be two methods of bidding, namely Forward Bidding where specified end-use is production of iron and steel, generation of power for captive use and cement and Reverse Bidding where specified end-use is generation of power.

"The indicative price offer shall be bid price per tonne of the coal produced. Such bid price shall be above the floor price in case of forward bidding or below the ceiling price in case of reverse bidding. The floor price and ceiling price for the coal mine along with the methodology for fixing the same shall be included in the tender document," it said.

Providing details of the methodology for auction of sectors like steel, sponge iron, cement, captive power etc, the government said, "The Intrinsic Value of the coal block will be calculated by computing its Net Present Value, based on the Discounted Cash Flow method. 10% of the Intrinsic Value will be payable upfront."

However, it added that the floor price shall not be less than Rs 150 per tonne.

On fixing the ceiling price for coal mines to be auctioned for power projects having cost-plus power purchase agreements, it said "a ceiling price of the prevailing CIL notified price for each coal mine will be fixed and the bidder will be mandated to quote lower than this ceiling price."

"A fixed reserve price of Rs 100 per tonne of coal shall be payable, as per actual production by the mine allottee."

For power plants having uncontracted capacity, the bidder shall be restricted to cap its "merchant capacity at 20% of the installed power capacity linked to the alloted coal mine... The reserve price in such cases shall not (be) less than Rs 150 per tonne," the Ministry said.