Coal news and updates

Coal auction 3.0 kickstarts with only non-power blocks

The third phase of auction started with two non-power blocks going under the hammer. Marki Mangli-I in Maharashtra and Bhaskarpara in Chhattisgarh were put for e-auction by the ministry of coal on the auction portal managed by MSTC mstcecommerce.com.

Mumbai-based Topworth Urja & Metals Limited won the Marki Mangli-I block for Rs 715 per tonne. This block did not find any takers during the last phase of auction. The mine has an extractable reserve of 8.35 million tonne and opened at a floor price of Rs 505 per tonne. The company will pay Maharashtra state government close to Rs 597 crore for a period of 30 years. The other bidders in the fray were Grace Industries Limited and Lloyds Metals & Energy Limited. The block earlier was allotted to BS Ispat before a Supreme Court judgement in August last year cancelled all coal block allocations.

Crest Steel & Power won the Bhaskarpara coal block for Rs 755 per tonne. The mine has an extractable reserve of 24.06 million tonne.

The company will pay Rs 1816.5 crore over 30 years to the Chhattisgarh state government. The bidding opened at a floor price of Rs 513 per tonne. The other bidders for this block were Jindal Steel & Power, Crest Steel & Power and Godawari Natural Resources. The mine earlier belonged to a joint venture (JV) company of UltraTech Cement and Electrotherm (India).

Both these mines are Schedule-II blocks, which were operational, but non-producing when their allocation was cancelled. The bids for these blocks however, were less as compared to the ones received in the last two phases ranging from Rs 1,500 per tonne to Rs 3,500 per tonne. Market experts said the overcapacity in the market coupled with slow growth of the steel and power sector led to subdued bids.

“These are comparatively smaller and non-operating mines. International coal prices have been correcting for a while and the medium term outlook is also bearish. Stagnant demand from power and steel sectors and better performance from CIL has certainly improved the domestic coal supply scenario, which is reflecting in lower premium on e-auction prices. It is unlikely to attract aggressive bids like the earlier rounds of auction,” said Debasis Mishra, senior director, Deloitte India.

The third phase of auction is only for unregulated sector i.e., iron, steel and cement manufacturing. There would be forward bidding model for these blocks wherein the bidders would quote above the floor price and the highest bidder would win the block. This phase has blocks which could not be auctioned in the earlier phases as they were involved in any legal tussles or whose allocation was cancelled by the government.

The earlier two phases of the coal auction for 40 producing coal blocks were held in February-April this year fetching the mine-bearing states cumulative revenue of Rs 2.85 lakh crore for a period of 30 years. Both power and non-power sector participated in the same.

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