Coal news and updates

Coal Ministry proposes to present paper on reverse bidding mechanism

The ministry of coal proposes to present a paper on reverse bidding mechanism which the government has chosen for auctioning the coal blocks. This information on the process will be laid in the parliament to allay any confusion, said officials.

This follows various representations and anxiety expressed in different quarters on the auctioning mechanism. As per officials, the paper will highlight as to why the government chose the reverse bidding mechanism and how far the concern that the mid sized companies will be disadvantaged as against the large companies.

The reverse bidding mechanism empowers the nominated authority to set a ceiling price and bidders have to bid lower than that. The lowest bidder wins the auction.

It is to be mentioned that the industry bodies have gone to the extent of alleging gross irregularities in the auction process. since the lowest bidder wins, mid sized companies have submitted to the ministry that in terms of sustainability of the costs, it will be detrimental to the costs of the mid sized companies.

As per the coal ordinance, the nominated authority in consultation with the central government will determine the floor price or reverse price in accordance with such rules as may be prescribed. The rules say that the centre may recommend the methodology for determination of the floor or reserve price, as the case may be, to the nominated authority which shall make the "determination of the same in accordance with the ordinance and these rules."

The government has asked all the previous allottees of coal mines to remove by April 8 the dry fuel extracted till march 31, paving the way for smooth handover of the blocks to successful bidders.

The government order follows auction of 33 mines in two tranches through which it garnered a massive Rs 2 lakh crore, surpassing CAG's estimates of a loss of Rs 1.86 lakh crore to the exchequer on account of allocation without auction.

In case of failure by the previous allottees of mines to remove stock within stipulated time, the successful bidders would be entitled to dispose them. The government said that nominated authority has been vested powers for disposal of coal stock of schedule ii, or mines in production.

Schedule ii mines are 42 blocks under production out of the 204 cancelled by the Supreme court in september last year, after terming the allocation process as "fatally flawed".

The disposal of stock would take place after a "joint inspection and measurement of coal stock till March 31, 2015 shall be undertaken in presence of representatives of coal controller's organisation (CCO), prior allottee and successful bidder/allottee on the appointed day i.e April 1," said the notice.

In cases where the ownership rights have not been vested to the successful bidder of mine, the inspection will be done by CCO representatives and previous allottee, it said.

The government said "no inspection" would be required in cases where successful bidders are the previous allottees. After inspection, the government would come up with the report of the coal stock same day, copies of which would be given to previous allottees as well as successful bidders.

After auctioning 33 blocks, the government is in the process of identifying 15-20 coal blocks to be auctioned in the next round.

source: http://www.business-standard.com