Auction of first coal blocks likely by March

India hopes to sell off the first coal blocks in a competitive tender by March, bringing in foreign bidders to a process that could boost the country’s coal output significantly, coal minister Sriprakash Jaiswal said on Tuesday.Jaiswal added that he supported government plans to make miners share part of their profits with locals as a means to curb lawlessness in mining areas.

Even if mines make a loss, they would have to pay the equivalent of around 10% of the royalties they pay to the state government to the locals, he said.“Now we are 100% sure competitive bidding will take place. The main thing is that via competitive bidding, we want to be more transparent,” Jaiswal said in the interview.

The ministry is drafting the rules for competitive bidding and awaiting approval from the President to a parliamentary amendment, which facilitates competitive bidding.“If this (new bidding system) works properly, India won’t have to import coal,” Jaiswal said.

With the economy growing at over 8% a year, India is struggling to boost coal output to match the rising demand for the resource from its growing power, steel and cement plants.

In 2010-11, India’s coal demand is seen at 656.31 million tonnes (mt), while indigenous availability is estimated at 572.37 mt, Jaiswal said in Parliament last month.

The ministry is contemplating a floor price for the auctions with proceeds going to state governments, but Jaiswal declined to give further details.

Any firm, Indian or foreign, will be able to compete, on condition that all of the coal must be sold locally to end-users.“The state government will get some money, and...people who will invest money and take the coal property, will be in a hurry to start production,” he added to show how the government and the coal sector will gain from the new system.

Jaiswal said he backed the profit-sharing proposal in the new mine Bill, which seeks to make miners share 26% of their profits with displaced locals and has triggered calls for concessions for state-run companies from the steel ministry.

“We want the land losers and the locals (to)...get so much money that they don’t go towards violence,” he said.In June, Jaiswal said if law and order problems were sorted, India’s coal production could jump by at least 25%.

Maoist rebels who say they are fighting for the rights of poor farmers and landless labourers have attacked state targets in eastern, central and southern India in an insurgency, which started in the late 1960s, but has been stepped up in the last few years.

They control areas of mineral-rich land with billions of dollars in business potential.“In our country the (Maoists) problem and the law and order problem (will be addressed by) the new system we are developing,” Jaiswal said referring to the new mine Bill.