India Increases Coal Blocks in First Phase of Auction, Allotment

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Researched by Industrial Info Resources India (Delhi, India)--Researched by Industrial Info Resources India (Delhi, India)--In view of the growing demand for coal in the country, the government of India has decided to add another 27 coal blocks in the first phase of its e-auction, which is slated to begin in March 2015.

"Initially, we were looking to offer 74, but seeing the requirements, we have decided to add 27 more blocks. Of these 101 blocks, 65 have been kept for the auction and remaining will be allocated to public sector entities," said an official.

While all statutory clearances, including those for the environment, are in place for the 74 blocks, including 42 in-operation and 32 ready-for-production, some blocks from the remaining 27 still require the green nod. Of the total 101, the government has decided to keep 63 for the power sector and 38 for non-regulated sectors such as cement, iron and steel.

Meanwhile, the Coal Ministry has released a draft approach paper, which would form the basis of the tender document. The ministry has sought comments from stakeholders by December 22. An inter-ministerial committee, drawn from power, steel, finance and other ministries, would also study the approach paper and suggest changes.

According to the qualifying requirements stipulated by the ministry, at least 80% of the investment in the project and at least 40% of investment in other units, if it is a multiple unit project, should be incurred for Schedule II mines, and similar conditions for 60% and 30% investments have been imposed for Schedule III mines. Schedule II mines are those which have already come to production and Schedule III consists of those about to start operations.

The approach paper states that for blocks being auctioned to companies where end-use is specified as power, a reverse bidding mechanism will be used wherein the lowest bidder wins. For other sectors, a forward bidding mechanism will be used wherein the highest bidder wins. The e-auction process will be handled by the state-run company, MSTC Limited (Kolkata).

The ministry has also proposed that companies cannot make multiple bids for a single mine. Bidding for more than one coal block for the same end-use plant also would not be permitted.

While a change in the controlling interest of the successful bidder is allowed, the ministry proposes to prevent the bidder from transferring the mining lease to a third party. The successful bidders will, however, be free to appoint a mine developer and operator.

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