Govt okays methodology to fix upfront payment for coal mines

intrinsic value of coal blocks to be calculated by computing net present value, based on discounted cash flow method

The government has approved the methodology for fixing upfront payment and reserve price for allotment of coal blocks to PSUs for sale of the fossil fuel mainly to medium, small and cottage industries.

The approval is for sale of the dry fuel to PSUs under the Coal Mines (Special Provisions) Act, 2015, a Coal Ministry official said.

The official further said that the intrinsic value of the coal block will be calculated by computing its "Net Present Value (NPV), based on Discounted Cash Flow (DCF) method."

The 10 per cent of the intrinsic value will be payable upfront in three installments of 5 per cent, 2.5 per cent and 2.5 per cent, he said.

This is similar to the methodology used for calculation of upfront payment for coal mines/blocks allotted to the government companies for specified end-uses, he said.

"A reserve price equivalent to the amount of the royalty on coal as per prevalent rate shall be payable on per tonne basis to the relevant coal bearing state government as per actual production of coal by the successful allottee including the allottees in West Bengal," the official said.

"The amount will be calculated as per...Prevailing rate of royalty ad-valorem on price of coal as reflected in the invoice, excluding taxes, levies and other charges. The statutory royalty and other levies payable on coal will continue to be governed as per extant rules," the official said.

The government last month approved allotment of coal blocks to PSUs for sale of the fossil fuel mainly to medium, small and cottage industries.

The move seen as a big-ticket reform in the coal sector is also being viewed as allowing state utilities to commercially mine coal and permitting the PSUs to sell the fuel to private companies.