New Delhi, Sept. 24: Private sector steel, cement and power companies can now bid and get coal mines.
The Union cabinet today approved a policy that allows the auction of coal blocks for the first time and the bidding will be held under a production-linked model.
So far, coal blocks were allocated to user industries through nomination, a process criticised for breeding corruption. State-run Coal India, however, will still be able to get blocks through allotments.
Under the new policy, bidders or the bidding consortium, which can include foreign investors, will need to have a minimum net worth and mining experience.
The government is likely to auction at least four coal blocks with nearly 2,000 million tonnes of estimated reserves before December, a senior coal ministry official said.
“The methodology provides for production-linked payment on rupee-per-tonne basis, plus a basic upfront payment equal to 10 per cent of the intrinsic value of the block,” said a coal ministry release.
The intrinsic value would be derived from the average selling price of the past five years based on free on board (FoB) prices from published indices of Platts or Argus, providers of energy price assessments.
The methodology approved by the CCEA would form the basis of allocation of 2.7 billion tonnes of coal reserves in 22 acreages to private companies.
The bids will be invited based on a production-linked multiple and a company quoting the highest multiple would become the preferred bidder. The method minimises risks to the developer against the upfront payment method.
However, for the power sector, where output prices are regulated, coal blocks would be available at a 90 per cent discount on the intrinsic value for tariff-based bidding.
The CCEA also approved the long-awaited shale gas and oil exploration programme to boost domestic output.
In the first phase, state-owned Oil and Natural Gas Corp (ONGC) and Oil India Ltd (OIL) have been permitted to explore and produce shale oil and gas from onland blocks that were allotted on a nomination basis before the start of the New Exploration Licensing Policy in 1999.