Coal news and updates

Coal block auctions may start next week

The blocks to be auctioned are in Jharkhand and West Bengal

The government will begin the process of auctioning coal blocks to private companies next week, two officials with direct knowledge of the matter said. The blocks will be awarded to sponge iron and cement companies on a competitive bid basis, the officials said, declining to be identified. “Sometime next week we could begin inviting applications from companies,” one of them said.

The government had planned to hold the auction in early February but could not start the process. India has never auctioned coal blocks to private bidders before. The blocks to be auctioned are in Jharkhand and West Bengal. The officials did not identify the exact blocks. The auction process will be conducted by Ranchi-based Central Mine Planning and Design Institute (CMPDI), the second official mentioned above said.

“Although we are targeting up to five blocks, we may finally end up putting 3-4 on the block,” this official said. “There are some technical issues with a couple of them, which we are trying to resolve over the weekend.”
The auctions will be on the basis of one-time competitive bids and not via the online route. “Our aim is not revenue generation or profit maximisation. Coal is not only a scarce commodity, but also critical to core sectors,” the second official said. On 5 April, Mint reported that the coal ministry had asked CMPDI to come up with detailed project reports for the six fields. Of these, one block was later declared “inviolate”—meaning it could not be explored because of environmental concerns.
On 24 September, the Union cabinet by an executive order cleared a new mechanism to govern these auctions. This was prompted by the Supreme Court coming down heavily on earlier discretionary awards of captive coal fields to companies. The Supreme Court is monitoring a probe by the Central Bureau of Investigation into irregularities in captive coal block allotments between 1993 and 2010.

Coal block allocations became controversial after the Comptroller and Auditor General of India, the government auditor, said in a report last year that the national exchequer had lost Rs.1.86 trillion in notional value by following a discretionary allotment process, rather than auctions, for coal blocks. In the formula cleared in September, a production-linked payment method was instituted in addition to an upfront payment of 10% of the intrinsic value of a particular coal field. The intrinsic value will be calculated on the basis of the net present value of a block, or the difference between the present value of cash inflows and outflows. The value of a coal mine will be based on the prevailing global selling price of the fuel using international benchmark indices.

If the auction does go ahead, it would be close on the heels of the government setting up a regulator for the coal sector. On Thursday, the cabinet cleared the creation of the regulator by an executive order.

Source: www.livemint.com