Outcome Budget 2011-12 of the Ministry of Coal-I: Reform measures and policy initiatives taken

The Ministry of Coal (MoC) has initiated the following reforms and policy measures to ensure efficient distribution of the coal produced:

• Supply of coal to small and medium sector consumers: Under the MoC's New Coal Distribution Policy (NCDP), 8 million tonne of coal has been earmarked for distribution to the consumers with annual coal requirement upto 4200 tonne per annum, through agencies nominated only by the State Governments. The concerned State and Central Government departments exercise administrative control over these agencies to ensure that the coal allotted for the targeted consumers is distributed in a fair and transparent manner. These agencies are liable to receive a certain percentage as service charge, over and above the basic price charged by the coal company, from their consumers. In all, 27 State agencies were allocated 5.76 MT coal for drawal under FSA. 
• Supply of coal on "cost plus basis": Under this scheme, financially non viable specific mines or projects are offered on cost plus basis to ensure a minimum IRR of 12% and to maintain a certain level of production. Consumers are required to enter into a cost plus agreement for supply of coal from such mines. Such projects can be offered to existing linkage holders, FSA holders and to future LOA applicants - with preference to power sector including IPPs, followed by fertilizer, cement, sponge iron plants. 
• E-auction of coal: NCDP paved way for launching of a fresh scheme for sale of coal through E-auction. While spot e-auction is almost similar to the old e-auction scheme in operation prior to the NCDP, where under any intended buyer can participate in the auction of coal, in case of forward e-auction, only end-users are eligible to have assured coal supply over a period of one year. In case of spot e-auction, coal is offered at 30% above the notified price, as minimum reserve price, in case of forward e-auction, however, the reserve price is fixed 60% over and above the notified price of coal, irrespective of whether the mine is running in profits or not. During April 2010 to December 2010, about 32.36 MT of coal was allocated under spot e-auction, while 4.33 MT was allocated under forward e-auction during the same period.