Coal news and updates

Auction may see demand for select few coal blocks

December 4: There will be demand for a select 42 coal blocks which are operational or likely to be soon, at the impending auctions that the government will be conducting in March next year, sources indicated to ICMW.

“A select few, which are already working or on the verge of production, will be in demand. There may not be takers for the rest, especially those which have not started production and will require certain clearances, even at the reserve or floor price level,” a source said.

The source also said various parameters, like the start bid price, location of the plant, balance reserves etc, will play a crucial role in determining players’ preferences.

The source said, for instance, the Gare Palma block is already producing around 7 mt coal annually and that JSPL is likely to bid aggressively to get it back.

Experts believe that players will be willing to pay 20% higher to secure captive coal supplies that are nearer to their end-use plants, “because the signals from the new government are positive and they will think at a global level and try to secure dollarized funding”. 

Sources also observed that the fight at the auctions will be predominantly between two categories of players – one, whose blocks were in operation for the last 3-5 years would like to get these back. Two, those who do not have any coal blocks but want to bid for those available at present.

They observed that the first category not only had the funds to participate in the auction but also detailed knowledge of the block.

A third category comprises those who had received allotment of a particular block on paper and had been holding on to these for the last 5-6 years but had not been able to develop the same because of lack of statutory clearances and land acquisition related issues.

“Very few players may bid for these still unknown blocks as they are not even fully explored,” said a source.

Banking industry sources observed that most banks and FIs are likely to back those companies that have mining experience. “Those without the requisite mining expertise are likely to be questioned by funding agencies as to whether they would be in a position to compete with the biggies like Vedanta and JSPL. As for the seasoned players, they would only be asked how much they expect to earn from a particular block, expected expenditure and revenues,” said a banker on condition of anonymity.