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India announces draft rules for maiden auction of coal blocks

India announces draft rules for maiden auction of coal blocks

Photo by Reuters

20th November 2014

By: Ajoy K Das

Creamer Media Correspondent

  

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KOLKATA (miningweekly.com) - India’s Coal Ministry has released draft guidelines for the auction of 74 coal blocks to be completed within the next four months.

The Coal Ministry document said that the government would conduct a two stage competitive bidding process for allocation of the coal blocks under the newly promulgated Coal Mines Special Provisions Ordinance, and bidders who qualified in the first stage would subsequently be invited to put in financial bids in the second stage of the electronic auctions.

To qualify for the bidding, investors would need to have end use project in power, steel and cement sectors requiring coal as input, the document said.

Revealing the rules for the country’s maiden attempt to allocate natural resource through a competitive bidding, the Coal Ministry document said that tender papers specifying minimum technical and financial qualifications would be made available to prospective participants shortly.

In a major relaxation of norms currently applicable to captive coal mine owners, the government said that all successful bidders of the coal blocks would be free to shift production from the allotted block to any other project owned and operated by the same investor after due intimation to the government.

Under current rules, no captive mine owner was permitted to transfer production for a mine allotted to a specific end use project nor the captive miner allowed merchant sale of excess production from the mine.

The draft rules stipulated that captive coal block owners whose licenses stood cancelled following verdict of the Supreme Court would be eligible to participate in the auctions. However, in the case where a successful bidder was not the same entity as the erstwhile owner of the coal block, the latter would be entitled to receive compensation from the successful bidder.

The quantum of compensation to the erstwhile owner would be determined by a designated authority set up by the Coal Ministry based on written down value of the mine infrastructure already created factoring in employees dues, payments to secured creditors and revenue due to the government, the document said.

A spokesperson of the Ministry said that the floor or reserve price of the coal blocks were being worked out but the government’s focus was not on revenue maximisation by keep the floor price at very high levels since tariffs for thermal power generation or base price from end use projects too needed to be kept in check in interest of the consumer.

Elaborating on the times lines, the ministry said that auction would be completed by February 11, 2015, and technical formalities of allotted completed by March 3, 2015 and final letter of allotment handed over to the successful bidder by March 16, 2015.

In September 2014, the Indian Supreme Court cancelled licenses granted to 214 coal blocks across the country since 1993 ruling that all such allotments were arbitrary and illegal.

Edited by Esmarie Iannucci
Creamer Media Senior Deputy Editor: Australasia

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