Coal news and updates

Govt panel questions UPA’s coal block auction process

A government-appointed panel has found faults with the coal blocks auction process initiated during the UPA government's term, amove that could further delay allotment of captive mines to private firms.

The UPA government had decided to benchmark value of coal blocks to a five-year average of global indices such as Platts and Argus. This came after the Comptroller and Auditor General of India said that free coal block allotment to private companies caused a loss of Rs 1.8 lakh crore to the exchequer.

An advisory committee on power, coal and renewable energy, led by Shiv Sena leader Suresh Prabhu, has questioned the move to value coal blocks at global prices and offer 90% discount on the value of mines to power firms, a senior coal ministry official said. "The government has questioned benchmarking coal block prices to international indices as this could result in unrealistic prices. The committee is asking that why can't coal block valuation be linked to Coal India prices," the official said. The committee's objection could delay allotment to private firms, which have not been given captive mines since October 2008.

The committee is also not in favour of giving large discounts to power companies, including the private ones, which can later become questionable, he said. As per the coal auction mechanism cleared by the Union Cabinet in September 2013, power firms are required to pay only 10% upfront price for a block as the generated electricity is sold at a price determined through competitive bidding.

The mechanism was put in place by the UPA government after brain-storming discussions between various departments and advisory firm Crisil Infrastructure.

The NDA government recently scrapped the pilot auction of coal mines in which three blocks were offered to steel and cement companies. Two of the three offered coal mines— Jhirki and Tokisud-II—did not elicit response from steel and cement companies though over 40 of them purchased bid documents in March this year. Only two Kolkata-based firms evinced interest in the Andal Babuisol block.

The coal ministry is of the view that insignificant reserves and difficult mining conditions prevented the companies from bidding.

The coal ministry is now exploring ways to offer mines with substantial reserves and pre-obtained clearances to attract investments. The ministry is also mulling an agency on the lines of Power Finance Corporation, which bids ultra-mega power projects, to identify, explore, secure clearances and bid coal blocks.

Source: The Economic Times