The Telegraph
Thursday , February 27 , 2014
CIMA Gallary

Coal block auction drill starts
Bids invited for three

New Delhi, Feb. 26: The government today invited bids for three coal blocks in Jharkhand and Bengal containing reserves of 499.4 million tonnes (mt).

This is the first time that the Centre is putting up coal blocks for auction after the earlier system of allocation was severely criticised by the Comptroller and Auditor General (CAG).

The allocation controversy surfaced in 2012 after the CAG questioned the government’s decision to award mining concessions without competitive bidding.

The CBI has already launched probes against industrialists and companies that had been allotted the blocks.

“The government has initiated an auction of coal blocks by inviting applications for the first time for allocating coal blocks through competitive bidding for specified end-uses,” the coal ministry said.

Officials said the mines identified for the maiden auction were not among those that were taken away from the allottees following the filing of court cases.

The blocks in Jharkhand are Jhirki & Jhirki (West) of East Bokaro Coalfield, which has an estimated reserve of 267.91mt coking coal, and Tokisud-II of South Karanpura Coalfield with an approximate reserve of 127.69mt.

The Bengal block is Andal Babuisol of Raniganj Coalfield that has 103.84mt reserves.

Coal from these three blocks will be used by steel, cement and sponge iron industries, respectively.

The auction will be conducted by Ranchi-based Central Mine Planning and Design Institute and will be based on one-time competitive bids.

It will not be conducted through the online route like telecom spectrum.

In September, the Union cabinet had approved the methodology for the auction of coal blocks, providing for upfront and production-linked payments and the benchmarking of sale prices.

The environment ministry will review the blocks before they are auctioned and the bidders have to agree to a minimum work programme, an official statement had said.

“The methodology provides for auctioning the fully explored coal blocks, and also provides for fast-tracking the auction by exploration of regionally explored blocks,” the statement said.

The policy provides for production-linked payment on a rupee-per-tonne basis, plus a basic upfront payment of 10 per cent of the intrinsic value of the block.

The intrinsic value will be calculated on the basis of net present value of the block arrived at through the discounted cash flow method.

“To benchmark the selling price of coal, the international freight-on-board price from the public indices such as Argus/Platts will be used by adjusting it by 15 per cent to provide for inland transport cost, which would give the mine mouth price,” it said.

There will be an agreement between the coal ministry and the bidder to perform minimum work programmes at all stages. The bidders will have to agree to milestones for obtaining environment and forest clearance permits and for developing the blocks.

The bidders will also have to give performance guarantees.

The policy also provides for the relinquishment of a block without penalty if the bidder has carried out the minimum work programme stipulated in the agreement.

Difficulties in obtaining environmental approval and securing land for mining have made India the third-largest importer of coal, even though it sits on the fifth-largest reserve.