Coal Ministry for strict norms on new block bids

Companies allotted coal blocks but having failed to do much on developing these are to be barred from participating in the proposed competitive bidding process for future allotments.

Besides, power projects already set up or under construction on the basis of coal being a “pass through” item of cost would not be allowed to participate. However, a bidding consortium with a mining company as its member would be given preference in the allotment of a coal block, if its bid is within 10 per cent of the highest offer and is prepared to match it.

At the same time, the central government plans to link payment schedules to achievement of successive targets in developing such blocks after the issue of letter of intent and mining lease, instead of a fixed time frame from the date of award. This is being considered since exploration and development of coal blocks depend on various factors, not all within control of the developers.
These are some of the stringent provisions being considered by the Centre to launch competitive bidding for allotment of coal blocks. As on June 23, it had allocated 286 blocks, with reserves of 43,548 million tonnes. However, due to poor performance, it has already cancelled 24 blocks. A committee chaired by the coal secretary has been appointed to prepare draft bid documents.

A coal ministry official, on condition of anonymity, told Business Standard: “Identification of coal blocks for allocation through competitive bidding will be done after making sure there are no compelling factors, such as presence of wildlife sanctuaries, which will stand in the way of the forest clearance. Time allowed for commissioning of the mines will be suitably revised, taking into account the ground realities in respect of issue of prospecting licence, forest and environment clearances and time take for land acquisition and execution of lease agreement. The prospecting licence needs to be issued along with the allocation letters for coal blocks.”

The official said the two-year period for completion of exploration would be counted from the date of grant of forest clearance for exploration.

Anil Sardana, chairman, CII national committee on power and managing director of Tata Power Company, makes a strong case for competitive bidding of coal blocks by ushering in a regime of 'production-linked payments' on the lines of the production-sharing contract successfully done for the New Exploration Licensing Policy on discovery and exploitation of oil and gas reserves. Besides, there is a need to strengthen the institutional mechanism and facilitate fast-track clearances for coal mining projects through a single-window inter-ministerial body. He called for introduction of an independent coal regulator to oversee mine planning and development, adherence to investment plans and compliance with production schedule.

More, end-use plants already operational or under construction, based on coal linkage from Coal India and Singareni Collieries Company or allocation of captive coal blocks made earlier, would not be allowed to participate in the bidding unless the captive blocks allocated do not have the capacity to meet the full requirement of coal for at least 30 years. The official said a mining company which entered into a long-term agreement for supply of coal to companies in steel, power and cement sectors would be eligible to take part in the bidding process.

“A member of the consortium will be allowed the advantage of the strength of its promoters and associate company in the group for meeting the qualification criteria. More important, the basis for selection of the successful bidder will be a combination of fixed price tag and extractable reserves-linked payment,” the official said.