Coal news and updates

E-auction fine but some areas need a relook

February 27: While e-auctioning of coal mines is being done through a transparent process and weeds out cartelisation, many companies taking part in the auctions feel there is scope of improvement in certain areas, informed sources told ICMW.

For instance, a source said, the bidder should get sufficient time to do the mine due diligence and the government should also provide mine details and clarity on expected resources and available infrastructure. “It would be better if the government seeks further feedback from the bidders/buyers/interested parties in future to make the process more robust,” said a source.

Another source said, first, the government should make certain corrections in its processes. The floor price has increased which means the market is ready to pay. But it should not go overboard in relation to extraordinary high bid prices.
 
Secondly, the source feels, in future, there is also a lot of ambiguity with regard to the mines’ data and there should be more clarity on the same. Moreover, through the two-bid process, it is eliminating 50% of the players from the competition. “I think this two-bid process should be done away with. For the buyer it could be a case of missed opportunity. The whole process should be more broad-based,” the source added.

Thirdly, the source feels the government should also fix a right model for independent power plants as it is not clear what IPPs are thinking in terms of bidding for coal at negative prices which looks irrational.

“The bidding process has its drawback in the sense that there will be stiff competition amongst the bidders and only the big fishes with financial strength will manage to get the assets while the small players who also depend heavily on coal – like the rolling mills, sponge iron units, brick kiln makers etc. – will find it increasingly difficult to procure their share of the fuel and in all probability close down. We must remember that Coal India was formed for the service of the nation. Now it has become a commercial organisation and thus the very aspect of nationalisation could be at stake,” said an official from an end-user company based in Nagpur.

An industry analyst said use of the auction proceeds with the objective of maximising government revenues alone is not likely to be in the long-term interest of our country, adding: “This could make us increasingly uncompetitive in most of our export sectors. How will more jobs be created?”