Liberal eligibility key criteria in largest commercial coal mines auction

The largest-ever commercial coal auction of 141 mines will see liberal eligibility criteria and almost no restriction on the sale of coal from these mines.

Commercial coal auction happen on a rolling basis, but the latest round, launched last month, is the largest to come in several months. With this, the Centre is hoping to entice interest from a variety of sectors beyond the core infrastructure.
 

Among other new features in the auction is introduction of sustainable mining practices and push to reduce carbon footprint of the mining activity.

According to an investor presentation given by SBI Caps, which is the transaction advisor to the coal ministry for the commercial coal mine auction, the current round would not have any technical or financial eligibility criteria.

“The basic eligibility for the bidder is to be a company or joint venture incorporated in India. A government company or corporation or a joint venture company between the Centre or the state government is also eligible,” said the presentation.

The current round also has a mix of small and large mines, which coupled with liberal terms would be attractive for investors from even non-infrastructure industries and also small-scale enterprises, said a senior official. 

Another significant addition to the auction process is the provision of “sustainable mining”. The presentation emphasised that the successful bidders should implement mechanised coal extraction, transport and evacuation in coal mines. “They shall strive to minimise carbon footprints from operations and promote sustainability,” it said.

The ministry has allowed successful bidders to terminate the mining operations in the wake of any unavoidable conditions, which when approved would not lead to forfeiting of bank guarantee.  

Miners who commence coal production ahead of the scheduled date will be given a 50 per cent rebate on the final offer (a portion of the performance security amount submitted by the bidder). Similar rebate amount is also for coal gasification/liquefaction by the miners or their associate companies. The ministry has also provided flexibility in annual coal production, wherein the miner would need to meet 65 per cent of scheduled production in a fiscal year and 75 per cent over three years.

Of 141 mines in this round of auction, 71 are new, 62 from earlier tranches of commercial auctions, and eight are being offered as a second attempt of the last round of commercial auctions, which did not receive bids. 

The coal ministry has auctioned close to 64 mines till yet under commercial auction. Senior ministry officials said three mines had already commenced production. While Palma IV/7 was awarded to Sarda Mining, Gare Palma IV/1 of Jindal Steel and Power (JSPL) and Takli Jena Bellora mine of Aurobindo Pharma recently received final approval to start production.

Forty-seven years after coal mining was nationalised in India, the Centre in 2020 opened the coal mining sector to private companies entering the commercial mining and sale of coal. This was in line with the amendments introduced under the Coal Mines (Special Provisions) Act, 2015, to award coal blocks to private companies for captive and commercial purposes.

NEW FEATURES
 

| Introduction of sustainable mining practices

| Push to reduce carbon footprint of the mining activity

| No technical or financial eligibility criteria

| Successful bidders can terminate operations in the wake of unavoidable condition

| Miners who begin coal production ahead of scheduled date will get 50% rebate on the final offer