Coal Auction 3.0: Mine sale resumes, linkages also to be auctioned to non-power sectors

No mines for power generators; multiple auctions ruled out

Resuming coal block auctions, the government has decided to offer 10 mines with a cumulative annual production of 13.14 million tonnes to cement, steel and aluminium companies and captive power producers. In the third phase of auction, there will be no coal mine for power generators.

The public notice for the auction will be issued on Monday and bidding will run from August 11 to 17.

The ministry of coal will also auction linkages to Coal India’s production for five years. So far, such linkages were given out by a committee of officials.

Tweaking the rules for the auction, two phases of which saw 40 coal mines being awarded, multiple bids have been barred. “Only one bid per end-use plant will be allowed. Multiple bids will be treated as one and the top 50 per cent bidders will be decided henceforth,” said Anil Swarup (pictured), secretary in the ministry of coal.

A new mechanism for auctioning long-term coal linkages from Coal India has been designed. The linkages will be provided to the unregulated sector initially, so that the market price of coal can be discovered. Earlier, the linkages were issued on nomination.

“We are trying to determine the market price of coal and also who should get how much and at what price. Coal India’s production has increased by 32 million tonnes in 2014-15 and it will soon decide how much can be auctioned as linkages,” Swarup said.

COAL MINE AUCTION

• 10 mines, 8 producing and 2 about to produce, to be on sale
• Auction only for unregulated sector, including steel, cement, aluminium and captive power
• Tender notice to be out on Monday
• Document submission by July 21, auction to run from  August 11-17
• Agreement to be signed with winners likely by  August 30
• Minor changes such as single bid per end-use plant allowed. Multiple bids scrapped

COAL LINKAGE AUCTION

• Proposal designed as ‘Supply Controlled Assembled Bid Auction’
• Auction only for unregulated sectors
• Linkage to be given for 5 yrs
• Government aims to discover market price of coal sold by Coal India
• Linkage to be decided on demand per user at specific price
• Existing linkage holders to surrender it by June 30, 2016

The “supply controlled assembled bid auction” will determine the opening price of a specific amount of coal. The price will keep increasing on bids. Bidding will close once supply matches demand, that is the amount of coal put for sale is equal to the amount of bids received.

“We will in the end have a pool of users ready to pay a certain price for a specific amount of coal. The power sector is kept out because the tariff depends on the price of coal and we want to first discover the price of coal by auctioning it to the unregulated sector,” said Swarup.

Existing coal linkages will have to be surrendered by June 30, 2016, and then companies can participate in the auction. The coal ministry said the mechanism for auction of coal linkages would change as suggestions came in. Officials said Coal India would calculate the amount of coal to be auctioned in a month’s time and the procedure would be decided thereafter.

The auction mines however would kick start by next week. In the first two phases of mine auctions, the government has awarded 40 coal mines to both power and unregulated sector unlocking revenue of Rs 2.85 lakh crore for a period of 30 years for the mineral rich states.