Coal auction to begin in Feb; Govt aims to keep lid on tariff

The keenly awaited auction of coal blocks will be held around February 11 but power tariffs are unlikely to shoot up following bidding, expected to be intense, as the government has put in place norms to regulate the bid war.
As per the draft rules of bidding for the first set coal blocks from among the 204 whose allocations were cancelled by the Supreme Court in September, the mines will be allocated only for specified end-use like power generation and there will be a cap on number of blocks a company can bid for.
"It is our endeavour that power tariff does not rise due to auction. We are in the process of evolving a system, which has not been finalised yet. It is not a revenue maximising process... It is essential to keep a lid on tariff," Coal Secretary Anil Swarup said unveiling the draft rules.

Swarup also said the government will ensure that the blocks are not monopolised by one entity. "To avoid monopoly, a cap on the number of blocks a company can bid for will be put in place."
"The bid due date would be around February 11. We hope to finalise the technical bid qualification by March 3. The auction will get moving on March 6 and we hope that by March 16, we should be able to issue a vesting order," Coal Secretary Anil Swarup told reporters here.
Government plans to auction 74 coal mines in the first lot. Of these, 42 are ones which are currently under production and where Supreme Court had allowed continuation of operation till March 31. The remaining 32 are ones which are ready to produce.

Request for proposal for these will be issued on December 22, 2014 and due date for technical bids is February 11. Technical bids will be opened on March 3 and e-auction or price bidding will start on March 6. The government hopes to allocate the mines by March 16.

The 42 producing mines currently produce about 90 million tons a year of coal and the remaining 32 ready-to-produce mine have potential of another 120 million tons.
Successful bidders, besides paying the winning price for the coal block, will also pay a fair value for the plant and equipment already installed at these mines.

Existing operator of these mines will get the fair value of his investment but will not have first right of refusal or the right to match the best price, he said.