KOLKATA (miningweekly.com) - The Steel Authority of India Limited (SAIL) has approached the Indian government for the allotment of at least three coal blocks on a preferential basis under the government dispensation route, rather than through competitive bids.

SAIL, the largest steel producer in the country, was seeking captive coal blocks to meet the feedstock requirement for its captive power plants and produce the energy needed to expand its steel-making facilities, sources in the Coal Ministry said.

The steel producer had identified six blocks of interest, three in the eastern Indian province of Orissa, two in central Chhattisgarh and one in northern Uttar Pradesh.

Arguing in favor of government allocation of coal blocks, SAIL pointed out that the company’s steel-making capacity was poised to increase to 24-million tons a year from the current level of 14-million tons a year and that the power requirement for this increased production would be around 1 800 MW - for which around 12-million tons a year of coal would be required.

The steel producer currently operates captive thermal power plants that generate 1 000 MW, which meets 70% of its energy requirements. It sources its entire coal feedstock from Coal India Limited.

The Indian government has firmed up plans to allocate 17 coal blocks through competitive bidding, for which 78 companies from user industries and the mining companies controlled by provincial governments have queued up. However, the deadline for commencing competitive bidding for these blocks had been delayed owing to the setting of a reserve price for the auction, the first time such auction in the case of natural resource allocation in the country.

However, SAIL as a majority government-owned company, felt that it was entitled to preferential allotment instead of going through the auction route, a senior official said.