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Select committee adopts all clauses in coal Bill with dissent from Congress, Left

BS Reporter  |  New Delhi 

The select committee on Coal Mines (Special Provisions) Bill, 2015, has accepted all 33 clauses without any modifications. However, the report of the committee tabled in the Rajya Sabha also includes the dissent note by five members of Parliament (MPs) and suggestions by two. Officials said this would reflect the line of voting by their respective political parties, when the Bill was put up for discussion on Thursday.

The Bill was tabled on Wednesday after two weeks of deliberations by the select committee. The Bill was promulgated in October last year and again in January to re-allocate the coal blocks, whose original allocations were cancelled by the Supreme Court in August 2014.

The dissent note was put by Digvijaya Singh, P Bhattacharya, and Rajeev Shukla of the Congress, Tiruchi Siva of the Dravida Munnetra Kazhagam (DMK) and K N Balagopal of the Communist Party of India (Marxist). The suggestions are given by the Samajwadi Party's Naresh Agarwal and the Bahujan Samaj Party's Narendra Kumar Kashyap.

The common line of dissent is on labour rights, their compensation criteria, role of the states, clause allowing commercial mining, and inadequate time for discussion on the Bill.

Questioning the clause that allows commercial mining in India after 41 years, Digvijaya Singh wrote that coal mining should be "for its own consumption" and the words "mining for sale or any other purpose" should be scrapped. He has also asked for setting up a regulator, as the operator of the mine has the right to sell coal in open market.

"There was unanimity in the committee that if the bidder is given the right to sell in the open market, there should be a regulator to ensure the interests of household consumers, medium and small enterprises, and cottage industries particularly that of brick kiln and glass manufacturing industries are protected," said Singh's dissent note.

He also said the interests of the labour class should be utmost when the prior owners of the mine are paid compensation.

Pradip Bhattacharya, too, has dissent on the same lines. He questioned the appointment of joint secretary (coal ministry) as the Nominated Authority of the coal blocks re-allocation process. He also asked for the representation of the states in it.

"As per clause 17(3), the statuary powers of the state government is sought to be suspended for an indefinite period to terminate a prospecting licence or mining lease. This is aimed at illegally to encroach and to take away illegally the powers of the state governments in this regard, which is against the federal principles of our nation," said Bhattacharya's dissent note.

The members of the Select Committee included 19 MPs from the Rajya Sabha; five officials from the Secretariat and the Ministry of Coal each; three each from the Ministry of Power and Ministry of Law & Justice; one representation from the Ministry of Tribal Affairs. It also had representation from three coal-bearing states - West Bengal, Odisha and Maharashtra. The committee is chaired by Anil Dave, a member of the ruling Bharatiya Janata Party. The ruling party is in minority in the Upper House.

According to officials in the know, none of the clauses in the Bill has been modified or dropped. "The dissent note by some MPs is attached for the perusal of the House. This also reflects the line of voting that their respective political party could take during the discussion on the Bill. Else, the committee adopted all the clauses without modification," said a senior official who was part of the Select Committee.

Business Standard reported on Wednesday that the panel on coal Bill had accepted all clauses, though there might be some dissent from the Congress.

Why the auction?
After 2014 block allocations over two decades were cancelled after a Supreme Court order in August 2014, the government promulgated an ordinance for reallocation of these mines. It was decided allotments to state-run firms would be done on the basis of technical criteria and to private companies through an auction.

The procedure

  • Private companies - Indian, foreign and joint ventures - were invited to participate in the auction of 42 operational and 32 about-to-produce blocks
  • Specified end-use was a must criterion for bidders from the regulated (power) and unregulated (iron, steel and cement) sectors
  • Interested companies were asked to make technical bids giving details on compliance with the eligibility conditions
  • Financial bids (comprising initial offers) were then made; on the basis of the prices offered, top five technically qualified bidders or 50 per cent of top bids were allowed to participate in the e-auction
How was the e-auction done?
  • Conducted on, commodity auction website of MSTC, from 14 February to 3 March
  • Reverse bidding for the power sector. That is, the company with the lowest bid gets the block, and the price discounted below the ceiling price is reflected in the final power price
  • Forward bidding for unregulated sector. That is, the highest bidder wins the block, and both ceiling and floor price are calculated by Coal India's notified price for a coal grade
The curious case of Rs 0 bid
  • Why? As there was reverse bidding in the blocks for power, companies could have gone below the ceiling price and even made Rs 0 bids
  • Meaning: A Rs 0 bid means a company is discounting the whole cost of coal in its final power tariff
  • New provision: The coal ministry added the provision that the moment a zero bid is made, the bidding will go forward. This means, if a bid comes down from a ceiling price of Rs 500 to Rs 0, the bids go in forward mode in multiples of Rs 2 a tonne, and the surplus money goes to the coal-bearing state
  • Benefit: All coal blocks for the power sector received Rs 0 bids. On Day-1 of the auction, Talabira-I in Jharkhand started at Rs 0 and closed at a whopping Rs 478 a tonne in forward mode
Why low bids created controversy
The government did not sign letters of allocation with eight winners, citing low bids. Officials said the bids for some blocks were much lower and bidding time was much less that some others that saw 15-20 hours of stiff contest
  • Govt's argument: The auction's aim was revenue maximisation, and such a huge gap in bids needed to be reviewed. The comparison would be done on a case-t-case basis to be sure the true value for the mines had been received
  • Industry's argument: The CEO of JSPL, whose two blocks are being re-examined, said on record: "If the process is transparent and clear, so is the outcome." He also challenged the government's contention of evaluation: "No two blocks could be compared because of their different sizes, gross calorific values of coal, locations in respect of the end-use plant, etc
  • The way out: Either the government will scrap the bids and go for re-auctioning or will maintain the status quo. The bids were examined by the nominated authority for coal block reallocation and an inter-ministerial committee for this. The final decision is likely to come by Friday.

First Published: Thu, March 19 2015. 00:33 IST