Government to auction 100 coal blocks by end of fiscal, hopes to steady coal sector

                     
   
NEW DELHI: The government will auction 100 coal blocks by the end of the current fiscal, seeking to put an end to the disruption in the sector after the Supreme Court cancelled more than 200 allocations.

The auction process will begin immediately with the coal ordinance being re-promulgated. The government resorted to this as the legislation didn't get parliamentary approval.



"Coal bill was passed by the Lok Sabha, but debate on it was not allowed in the Rajya Sabha... With the re-promulgation the unfinished process of allocation of coal blocks will resume again," finance minister Arun Jaitley said at a press conference after the Cabinet meeting.

The first set of 41 coal blocks will be auctioned in the second half of February, followed by 32 and 27 in two more batches, respectively, by March 31. The government aims to sign agreements with the allottees of the first-phase auction on March 23.
Initially, the government had wanted to auction 42 blocks but one of these is in the so-called 'no go' area, leaving only 41. The government will follow reverse-bidding process for power producers to keep electricity tariffs low while steel and cement firms will have to participate in forward-bidding. The eauction will be managed by the online platform created by the state-controlled MSTC.

Coal secretary Anil Swarup said tender documents would be released on January 27 and the blocks (including 17 to be allocated to state PSUs) will be auctioned during February 14-22.

He stated that out of 24 mines proposed for the auction, seven are for the power sector, 16 for other end-use plants of iron and steel, cement and captive power projects and one coking coal mine for the steel sector.
The auction process starts on Thursday. "For the unregulated sector, floor price will be determined for each mine depending on its net present value.

But under no conditions will this price be less than Rs 150. In case of the reverse auction, that is in the regulated sector, since we are not determining a price there will be a reserve price of Rs 100 per tonne," Swarup said.

Net present value of the mine will be based on the grade of coal and prices Coal India charges. A committee headed by former Central Vigilance Commissioner Pratyush Sinha is working on the valuation of each mine.

"Total payment to the states in 30 years would be around Rs 3.5 lakh crore for 30 years for 204 blocks that have been cancelled by the Supreme Court. In addition to this, an equal amount will also flow to the states by way of royalty. So all the coalbearing states stand to benefit to the tune around about Rs 7 lakh crore over 30 years," said Swarup.

He added that these are initial estimates and the amount may go well beyond this if there is an increase in coal extraction. The key beneficiaries will be West Bengal, Odisha, Jharkhand and Chattisgarh.

Commenting on the methodologies, Swarup said: "Of these 63 blocks that are going to the power sector, 28 will be auctioned, 35 will be allocated to state entities.


The Act provides for auction to private companies and allocation to government companies."

For the mines where earlier allottees have invested in creating infrastructure, Swarup clarified that each tender document will specify what will be the amount of compensation that will have to be paid to the original allottee by the new allottee.

The auction process will comprise 'techno-commercial bids' for qualification and 'financial bids' for selection. Only 50% of the qualified bidders from the technical stage will be allowed to participate in the e-auction process. Mines set aside for iron and steel, cement and captive power producers (CPPs) will be auctioned through an 'ascending forward auction'.