KOLKATA (miningweekly.com) - The protracted process of preparing for and ultimately holding India's maiden coal block auction has inched forward with the Environment and Forests Ministry issuing a `comfort letter’, basically equating to provisional clearance.

According to an official in the Coal Ministry, the government agency had sought an ‘in-principal’ clearance for each of the blocks to be put up for auction, in order to get better valuations.

While the Environment and Forests Ministry has informed its coal counterpart that this would not be possible, it did, however, provide an alternative ‘comfort letter’. The letter did not automatically guarantee mandatory clearances to successful bidders for the blocks.

The Coal Ministry has maintained that in the absence of environmental clearances, which were normally much delayed, blocks would not fetch a fair price at the auctions, as most bidders were put off by the development of the project being held up delays in securing multiple government approvals, the official said, pointing out that around 90% of new coal block projects were currently held up for these reasons.

Nonetheless, the ‘comfort letter’ would be a halfway house towards ensuring a fair price at the proposed coal block auctions, the official added.

While framing the auction rules, the Indian government had maintained that all mandatory environmental clearances would be handed over to the successful bidders to ensure the bidders were able to develop the blocks within the timeframes specified in the bid papers.

The government’s objective was to speed up the auction of blocks, as no coal block had been allocated to private investors for captive consumption since 2008.

However, efforts to facilitate such investors were scuttled by inter-Ministerial face-offs, with the Environment and Forests Ministry claiming that in-principle clearances could not be given without scrutiny of the details and project parameters submitted by investors, including a geological report, the mining plan, production forecasts, technology and relocation and rehabilitation packages.

Before the blocks can be auctioned, the Coal Ministry, which had delayed the auction by over a year, would now present new auction procedures to an inter-Ministerial group, followed by approval from the Cabinet Committee of Economic Affairs (CCEA).

In the first round of auctions, the Ministry proposed to put up for auction coal blocks with estimated reserves of about 500-million tonnes for captive consumption by private companies in steel, cement and power.

The draft rules include stiff penalties that include de-allocation of blocks for not adhering to performance parameters submitting with bids, while the investor would have to apply for mining leases from the respective provincial governments.