Reallocation of coal blocks: E-auctions likely by February

Govt issues draft norms; mines to be allotted to PSUs; diversion for similar end use allowed

The coal ministry has issued draft guidelines for reallocation of coal mines cancelled by the Supreme Court, marking the duties of the authorities appointed to operate the ordinance issued.

The Centre plans to conduct a two-stage auction under the Coal Mines Special Provisions Ordinance. Qualified bidders in Stage-I will be asked to give financial bids in an electronic auction. Bidding will be open to specific end-use projects in the power, steel and cement industries. The guidelines also specify the technical and financial qualifications of bidders.

In the first phase of reallocation, 42 working coal mines and 32 in line to start will be offered to developers with notified end-use projects. But ministry officials said they could also auction some of the 130 non-operational mines, if necessary.

A Supreme Court judgment on August 25 had held as illegal the coal block allocations made between 1994 and 2013.

A nominated authority will set the method for pricing coal at the auction and a Cabinet proposal will be issued in a fortnight. Valuation of assets associated with the mines will be kept separate from the bid amount and given as compensation to the previous allottees after mines are transferred to the new bidders.

"Some mines will be allocated to public-sector companies in the power, steel and cement industries, the rest will be auctioned for end use. There will be a cap on the number of mines to be allotted to a single operator," said Anil Swarup, secretary in the coal ministry.

He said public-sector allottees could hire mining development operators for assistance in mining, but joint ventures with private companies would not be allowed. Mine allocation will be on requirements to prevent hoarding.

"An allottee may use coal from a particular mine in any of its similar end-use plants by intimating the government, and allottees can swap coal," Swarup said.

Coal ministry officials said they would try to issue the request for proposal by December 22, begin the bidding process by mid-February and issue letters of allocation by March 10.

Swarup added the bidding process would be common but the government might cap tariffs for projects that generated power under a pass-through mechanism to keep electricity prices in check. Following the ordinance, the coal ministry formed three committees to oversee the reallocation of mines. A valuation committee is valuing the land and assets of the cancelled mines, a technical committee is looking into requirements of bidders and suitable mines, and a pricing committee is deciding on the reserve price.

RESOURCE MOBILISATION

• By December 22:
  Issue of Requests for Proposal (RfP)
   
• Mid-February, 2015:
  Bidding likely to be in a three-day window
   
• Process followed:
  Allocation through auction and allotment, only to govt companies
   
• Pricing:
  On the basis of geological reserves; the range could be Rs 5 lakh (for less than 10 mt) to Rs 1 crore (for more than 1,000 mt)
   
• March 10:
  Targeted date for issue of letters of award to begin
   
• Mine dossier & e-auction modalities:
  To be prepared by a nominated authority; mine dossier to have details of geographical area, coal reserves, mine infra, approvals, permits, etc, for each mine
  

 

Eligibility to bid:
To depend on the status of preparedness of end-use plants - 80% of investment should have been made in end-use plants (for 42 operational mines), or 60% of investment should have been made (for 32 ready-to-produce mines)