Coal news and updates

‘Coal block re-auction may meet legal challenges’

March 19: Even as Coal Secretary Anil Swarup recently tweeted that he was “not making any allegation of cartelisation as of now”, 8 won coal blocks which could be put on re-auction or given away to public sector entities in steel and cement, is creating some buzz in the industry, ICMW has learnt.

The names of the 8 mines have not been disclosed by the government yet but many of these belong to the Gare Palma clutch, one of which had been won by Jindal Steel & Power and another by cement biggie HINDALCO. Three of these are in the Schedule II category (producing mines) and the balance 5 in Schedule III (ready-to-produce).

A source, speaking on condition of anonymity, said, while there is a clause that allows the government to exercise sovereign rights and re-auction the mines or give them away to PSU entities, there will be legal challenges. “The players allotted that mine has the option of taking recourse to legal measures. This will only delay the process of mining because till the legal tangles are sorted out the mine will hang fire, the end-use plant will suffer and in the long run, the economy.”

The source also feels that giving them away to PSUs could also mean the government does not expect bids on the block during re-auction since that particular block was required by only a certain company which had bid in the previous round.

Coal Secretary Anil Swarup told reporters that the government was reviewing the bids for the eight mines as they attracted prices lower than the trend for other blocks of similar nature. Jindal Steel had bid Rs 108 per ton for Gare Palma IV/2 & 3, a block it had previously been allocated during the UPA regime. Media reports indicated that bids on similar blocks were at least 5-10 times higher.

Another source wondered aloud why there have been hints of cartelisation only with regard to mines that attracted bids lower than the government’s expectations. “The same logic should also apply to those blocks which attracted phenomenal bids,” said the source, adding that companies bid for certain blocks keeping in mind their requirements and the logistical aspects in mind. In short, their requirement of a particular block was very high and thus they participated in the bidding process.

“If a company has an end-use plant close to a particular mine, then it should get to keep the mine it won at the auctions,” said a source, adding that if someone bid a much higher price then these bids should also be re-examined.

However, taking a different view, a third source said that the low bids could have been due to technical glitches which had been common during the initial phases of coal e-auctions whereby bidders got coal at rates lower than the floor price.