Competitive bidding likely for coal mining

Power, cement and iron, and steel companies may now have to go through a competitive bidding process to win captive mining blocks. This may be on the lines of the bidding process outlined in the New Exploration and Licensing Policy for the petroleum sector.

The ministries of law and coal will examine the bidding proposal which has received a go-ahead from the Prime Minister's Office. The power ministry had objected to the proposal, saying it could affect thermal power plants.

The PMO has directed the two ministries to work out the details within two months and send a report to the Energy Coordination Committee headed by Prime Minister Manmohan Singh.

At present, allocation of captive mines is decided on the basis of recommendations made by a screening committee. A total of 143 blocks had been identified for this purpose. Of these blocks, 86 have so far been allotted.

The government will provide a comprehensive geological database on prospecting to bidders without showing any bias to Coal India Ltd.

At the last energy coordination meeting, it was decided to adopt a liberal approach to allowing foreign direct investment in captive mining and doing away with the 74 per cent ceiling for iron and steel, and cement manufacturers. This ceiling does not exist for the power sector, which is the third industry allowed captive mining of coal.

The coal ministry was also asked to look into the changes in the law required for letting captive mine operators sell excess production to any other eligible user.

At present, captive mines are allowed to sell coal produced during the development phase to a Coal India Ltd subsidiary at a transfer price determined by a committee.

A change in this may require amendments to the Coal Mines (Nationalisation) Act since free sale of coal can be considered a violation of the legislation.

The committee has also decided that any increase in coal prices due to the adoption of a bidding process for allocation of mines can be a pass-through in the case of power since regulators permit this.

AT PAR WITH OIL

NEW PROCESS on the lines of NELP in the oil sector

LAW, COAL ministries to examine the proposal

THE PROPOSAL has been approved by the PMO

GOVERNMENT TO not to discriminate in favour of Coal India