Draft rules for auctioning coal blocks issued

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SME Times News Bureau | 18 Dec, 2014
The coal ministry Thursday published draft rules for the e-auction of cancelled coal blocks, inviting stakeholders' comments on, among others, the suggested floor price and its ceiling for power sector bidders.

The draft rules propose tariff based reverse bidding where the end-use is power generation, and forward bidding for production of steel, cement and generation of power for captive use.

While the criteria for calculating the floor price for bidding would be based on state miner Coal India's (CIL) price of coal of the same grade, the auction would also have a ceiling price for power sector bidders to keep the lid on power tariffs.

The floor price would be not less than Rs.150 per tonne, while potential bidders would have to pay upfront as floor price 10 percent of the intrinsic value of the mine. The bidder with the highest floor price would be the preferred bidder.

The ministry plans a two-stage bidding, where after qualifying in the technical stage, the top 50 percent of the pre-qualified bidders would participate in the e-auction and submit price offers.

The technical eligibility criteria hinges on the end-usage of coal, amount of the fuel required, distance of end-use plant to the mine and its completion status of the same. The satisfying of this could result in power, steel and cement projects getting back captive mines alloted earlier after payment of penalty.

Successful bidders would have to sell any surplus coal produced from their captive mines to Coal India at the notified price.

The bidders would also pay the cost of land, mine infrastructure, leases and clearances paid by the previous owner.

The e-auction will take place in 69 days of issue of public notice regarding the same.

Earlier this month, Coal Secretary Anil Swarup told reporters here that the mines' auction would be unique because the way "we are working on it, tariffs will actually come down".

He said the ministry will auction or allot 18 more coal blocks with a combined capacity of about 120 million tonnes, in addition to the 74 already in the first lot, to meet the needs of the power sector.

Of the 92 mines to be allotted and auctioned in the first lot, 57 would be given to the power sector, and the remaining would be for industries like steel and cement.

According to him, of the 57 blocks to be allotted and auctioned for the power sector, 23 will be considered for allotment to states and the rest will be put for auction.

The Supreme Court in September cancelled the allocation of 204 mines allotted between 1993 and 2010, describing their allotments as arbitrary and illegal.