Jaiswal meets infra cos today on coal block auctioning

Coal minister Sriprakash Jaiswal would discuss the modalities of coal block auctioning with infrastructure companies tomorrow. The ministry had announced draft guidelines for introducing competitive bidding in allocation of coal blocks for captive use in April this year.
Coal mining is an exclusive domain of the public sector, though private entities are allowed to mine for small notified captive use linked to projects. “The minister would discuss the views of stakeholders on the auctioning guidelines in the meeting on Monday. The stakeholders include mining companies and firms in the steel, power and cement sectors seeking captive coal allocations for their end-use plants,” said a senior coal ministry official.

So far an inter-ministerial committee used to allocate captive blocks to the private sector on merit. Parliament passed the Mines and Minerals (Development and Regulation) Amendment Bill, 2010, in August last year, paving the way for introduction of auction of coal blocks through competitive bidding to private companies.

The coal ministry had then prepared a draft of the framework for auctioning after months of deliberations in an inter-ministerial committee headed by the coal secretary. The draft gave four models for selection of successful bidders during the multi-step auction process.

The four models, one of which would be finalised, include upfront payment, production-linked payment, upfront payment with priority for development status of the end-use plant and production-linked payment with preference for development status of the end-use plant in power, cement and steel sectors.

“The views received so far by the ministry are varied. For instance, companies who already hold end-use projects have preferred the fourth option to get the benefit of weightage,” said the coal ministry official. Firms intending only to grab blocks are likely to prefer the first one of upfront payment. In the second (production-linked) model, payment will be made by the winning bidder on the basis of a “reserve price tag” for coal on a per tonne basis over the entire life of the coal mine.

The common thread that runs through all the four is the preference to be accorded to projects set up in the same state in which the mine is located.

Tomorrow’s meeting would be attended by the secretary and the special secretary in the coal ministry, along with the Coal India chairman and secretaries in the related ministries of steel and power. It would be followed by a meeting of the inter-ministerial committee headed by the coal secretary, in which the model most preferred by the stakeholders will be finalised for inviting bids.