Experts fume as 4 coal block bids rejected for being too low

21 Mar 2015


The coal ministry has rejected winning bids for four of 33 coal mines put up for auction in the last two months, chief secretary to the ministry Anil Swarup said today.

The ministry had examined nine blocks, the surprisingly low bids for which prompted the designation "outliers". But bids for five of those mines were accepted, coal secretary Swarup said in a tweet message.

The decision will hurt Jindal Steel and Power Ltd most, according to a Reuters report.

Although the winning bids for the nine mines were the highest in their individual auctions, they were low by comparison with the winning bids for other similar blocks.

Jindal Steel, controlled by former MP lawmaker Naveen Jindal and one of the biggest beneficiaries of the previous method of mine allocation that the Supreme Court ruled illegal, has now become the biggest loser with three of its bids rejected.

Aluminium maker BALCO, majority owned by mining major Vedanta Ltd, is the other company whose bid was cancelled, according to a list in Swarup's message.

Jindal Steel had offered to pay Rs108 per tonne in the auction for Gare Palma 4/2 and 4/3, two adjoining blocks it had held previously. That was the lowest winning bid among the first few blocks meant for the power sector.

Bids are typically based on estimated tonnage in the mines and quality of coal available.

Bids on other blocks in the power sector had ranged as high as Rs1,100 per tonne.

Jindal Steel and industry consultants have said it was wrong to cancel winning bids after a base price of Rs100 per tonne was set.

Others have said reassessing the auctions after the posting of the highest bids sends wrong signals to the market ahead of more auctions.

The government is looking to sell off more than 200 coal mines, and parliament passed a bill on Friday allowing this route – much criticised by experts – for helping boost production (See: Rajya Sabha clears mining bill without too much fuss).

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