Jindal Power says it is puzzled by rejection of bids

The govt in its announcement late last night cancelled the bids from JSPL and BALCO

After the government’s decision to reject two bids by the Naveen Jindal-promoted Jindal Power Ltd in the coal e-auction, the company said on Saturday that it was puzzled by the decision.

“We came to know about the decision past midnight. We would make our best efforts to engage in a dialogue with the coal ministry and government authorities to present the facts. The reason cited being ‘the highest bidder doesn’t reflect fair value’, which we fail to understand as our bid was much below the ceiling price during the reverse auction process,” said the official response of Jindal Power.

Business Standard had reported on Saturday that the coal ministry did not approve bids received for three of the eight coal blocks being scrutinised, citing “comparatively low bids”. Two of these were won by Jindal Power and one by Balco (Bharat Aluminium Company). Sources in the government said because of stark differences between bids in the same category, these were not approved.

These blocks are likely to go to the state-owned Coal India till any further action. Anil Swarup, secretary, ministry of coal, tweeted late on Friday night: “Bids for Gare Palma 4/1, 4/2, 4/3 and Tara coal blocks not accepted.”

The two that were won by Jindal Power are Tara in West Bengal and Gare Palma IV/2&3 in Jharkhand, meant for power generation. The third coal block meant for steel, cement and iron sectors, Gare Palma-IV/1 in Jharkhand, was won by Balco.

When contacted, Balco refused to comment on the development as it was still studying the matter.

“Direct tariff benefit of approximately Rs 27,660 crore would be accrued based on our bid. (Rs 11,469 crore from Gare Palma IV/2 & 3 and Rs 16,191 crore from Tara Coal Block respectively)”, Jindal Power said in its official statement. It also said that the gross value of the bid (ceiling price + highest bid price + tariff benefit to consumers + additional tariff benefit to Chattisgarh + taxes & cess) was pegged at up to Rs 58,572 crore, which would go to the state’s kitty.

Jindal Power had won back its Gare Palma-IV/2&3 block at the lowest bid, Rs 108 a tonne. CEO Ravi Uppal in an earlier statement to Business Standard had said the government had the right to do anything but “if the process is transparent and clear then the outcome is also the same”.

Of the 34 coal blocks auctioned in two phases, letters of allocation for eight were held, as the ministry said the bids were low when compared with those for other blocks. Thus, these bids were sent for a re-examination.

In the first phase, 21 operational mines were auctioned, while in the second 19 about-to-produce mines were auctioned (from February 14 to March 10). Jindal Power bid the lowest in both the phases for blocks meant for power generation. Balco, on the other hand, was the lowest bidder in the unregulated category.

Reverse bidding was followed for the power sector. For the unregulated sector, forward bidding (that is, the highest bidder wins the block) was used.