Government to auction 101 coal blocks in phase 1, sets bid norms

The government has raised the number of coal blocks being auctioned in the first round of auction to 101, with the addition of nine more coal blocks to the 92 decided earlier, paving the way for auction and allotment of nearly half of the 204 coal blocks that were cancelled by the Supreme Court in September.

The government also issued draft rules for e-auction of the cancelled coal mines and fixed a floor price of Rs150 per tonne for bids from sectors like steel, sponge iron, cement and other captive power units.

While all statutory clearances, including environment, are in place for 74 blocks (42 already in operation and 32 ready for production), some blocks from the remaining 27 require environment clearances. ''We are trying to get all approvals, so that even these blocks meet the auction/allocation timeline of March 2015,'' a coal ministry official said.

Of these 101, the government has decided to keep 63 for the power sector and 38 for non-regulated sectors such as cement and iron and steel.

While the coal mines will be earmarked for different end-use sectors, they will be allocated through a competitive bidding process of e-auction, the government stated in a notification.

"In order to conduct the auction of coal mines in accordance with the Coal Mines (Special Provisions) Ordinance, 2014 and the rules framed thereunder, the Authority (Nominated) is required to prepare a tender document.

According to an approach paper to the tender document prepared for public consultation, there will be two methods of bidding, namely forward bidding where specified end-use is production of iron and steel, generation of power for captive use and cement, and reverse bidding where specified end-use is generation of power.

"The e-auction may be conducted on forward/reverse basis, depending on the end-use industry. Applications will be sought from intending companies in these sectors for pre-qualifications and only the top 50 per cent of the pre-qualified bidders... will be allowed to submit their bids."

"The indicative price offer shall be bid price per tonne of the coal produced. Such bid price shall be above the floor price in case of forward bidding or below the ceiling price in case of reverse bidding. The floor price and ceiling price for the coal mine along with the methodology for fixing the same shall be included in the tender document," it said.

However, the ministry said, the floor price will not be less than Rs150 per tonne.

For power plants having uncontracted capacity, bidding will be restricted to its "merchant capacity at 20 per cent of the installed power capacity linked to the allotted coal mine... the reserve price in such cases shall not be less than Rs150 per tonne," the ministry said.

On fixing the ceiling price for coal mines to be auctioned for power projects having cost-plus power purchase agreements, it said, "a ceiling price of the prevailing CIL notified price for each coal mine will be fixed and the bidder will be mandated to quote lower than this ceiling price."

"A fixed reserve price of Rs100 per tonne of coal shall be payable, as per actual production by the mine allottee."

For auction of coal blocks to sectors like steel, sponge iron, cement, captive power etc, the government said, "The intrinsic value of the coal block will be calculated by computing its net present value, based on the discounted cash flow method. Ten per cent of the intrinsic value will be payable upfront."

"The approach paper is for the initial rounds where Schedule II and Schedule III blocks will be offered for auction/allocation," said the official.

Schedule II mines are those which have already come into production, while schedule III mines are those which are ready to come into production. Schedule I includes all the de-allocated coal blocks.

The e-auction process will be handled by the public sector company MSTC Ltd (formerly known as Metal Scrap Trade Corporation Limited).

The coal ministry has sought comments from stakeholders by Monday (22 December).

Meanwhile, minister of state (independent charge) for power, coal and new and renewable energy Piyush Goyal informed the Lok Sabha in a written reply today that the government's focus was to increase coal production to the maximum by facilitating environment and forest clearances expeditiously, pursuing with state government for assistance in land acquisition and coordinated efforts with Railways for movement of coal.

Further, he stated, Coal India Limited (CIL) was in the process of enhancing production through capacity addition from new projects, use of mass production technologies, and identification of existing ongoing projects with growth potential.

Regarding import of coal despite large reserves of coal, the minister stated that India has adequate coal reserves for meeting its coal requirements and as such these reserves would be adequate to meet the coal requirement at the present demand level.

However, the actual production of coal falls short of the overall demand. Accordingly, the gap between total consumption and domestic supply is being met through import of coal. The import of non-coking coal in the country has increased from 48.6 million tonnes in 2009-10 to 131.3 million tonnes 2013-14.