Fourth round of coal auction put off amidst lax response from bidders

31 Dec 2015


The coal ministry has decided to call off the fourth round of coal block auctions for deregulated industries like steel and cement with slow response from bidders amid depressed commodity prices and lacklustre market conditions.

The auction was launched last month with nine blocks and bidding was to open on 18 January. The coal ministry has so far received 15 bids for the nine blocks. In two blocks, there were three bids and in two others there were less than three bids.

"We have not got sufficient number of bids to carry on with the coal block auctions. We have received 15 bids for nine blocks... so in view of this, we had to annul the process," coal secretary Anil Swarup told reporters on Wednesday.

Swarup said the industries for which the mines were being offered have been impacted due to adverse market conditions.

Sources said with only 20 per cent of the mined material accounting for coking coal, the coal blocks being offered are not worth bidding for, at least for steel companies.

In India there are only a few good coking coal mines and the output of the others are poor.

Also, importing coal is a better proposition now as international prices of coal have come down. Compared to 2013-14, when imported coal prices had shot up, in 2015-16 international coal prices declined as much as 40 per cent.

Australian coal is down to $44.82 a tonne from $84 a tonne last year. Indonesian coal is down to $34 a tonne from $57 a tonne last year. South African coal saw the biggest slump to $40 per tonne from $72 a tonne in 2014-15.

"International coking coal prices have come down by almost 60 per cent in two years. It was $200 a tonne two years ago. At present, it is $80-85 a tonne," said the executive.

"As of now it appears that demand or financial commitment that they have to make in terms of acquiring these mines... they may not be in a position to do so because of the general condition of the market," he said.

He said the government would wait for the right time to resume the auction. "We will look at the market situation and offer again. Right now it appears that in general commodity prices are depressed so are the coal prices... companies that would have bid are not financially strong at this point of time."

The previous three rounds of auctions would generate proceeds of over Rs3 lakh crore, to be realised over 30 years, for states where the mines are located.

The coal blocks, which were to be put under the hammer were Brahmapuri and Suliyari in Madhya Pradesh, Bundu and Gondulpura in Jharkhand, Gondkhari and Khappa Extn in Maharashtra and Jaganathpur A and Jaganathpur B in West Bengal besides Bhaskarpara mine in Chhattisgarh.

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