2 bidding stages for captive coal mines

Steel, cement and power companies may now have to go through two stages of bidding for captive coal mining on lease.

This is because the government is planning to replace the screening committee route while allocating captive coal mines to these companies.

The coal ministry, under directions from the Prime Minister's Office, has circulated a draft bidding document that requires companies to pledge annual production-linked payments (PLP) to the government.

It also plans to make the lease period for captive mines flexible to the extent of being even less than 30 years.

The two-stage bidding is likely to make coal more expensive for these companies. Several users, including the power ministry, have maintained that coal companies should also be allotted blocks through bidding and not through the nomination route.

Bidders will be required to submit techno-commercial bids, followed by price bids. They will also be required to quote a year-wise per cent of coal produced from a captive block to be shared with the government for the entire mine life.

This year-wise per cent will be used for calculating PLP for each year. It will be arrived at by multiplying the prevailing price of equivalent coal in the designated Coal India Ltd subsidiary, Singaeni Collieries Company, on the date of evaluation. A techno-commercially qualified bidder offering the highest value of PLP will be allotted the block.

If at the time of the payment, the actual mining production is less than that indicated, PLP will be calculated on the basis of the scheduled production level indicated in the pre-feasibility report, or on the actual annual production level indicated by a bidder, whichever is higher.

The successful bidder will be required to submit security deposits for a mine and the end-use project in the form of letters of credit amounting to 1 per cent more than the maximum PLP offered in any year.

The government has also inserted a clause on penalty in the event of slippage in the production schedule. The penalty will be equal to 25 per cent of the security deposit. On exhaustion of the security deposit, the block will be de-allocated.

At present, a screening committee headed by the secretary to the coal ministry, and comprising representatives from ministries of railways, power, and steel, department of industrial policy and promotion, concerned state governments, and representatives of coal companies, considers proposals and allots mines for captive mining.