File picture of Talcher coal mine in Odisha

New Delhi, Oct. 20 (PTI): In a major move towards energy sector reforms, the Union cabinet today recommended promulgation of an ordinance to facilitate e-auction of coal blocks for private companies for captive use and allot mines directly to state and central PSUs.

The move comes against the backdrop of the Supreme Court last month quashing allocation of 214 coal blocks to various companies since 1993. The court had termed the allocation method as “fatally flawed”.

“The cabinet has recommended promulgation of an ordinance to the President in order to resolve the pending issues particularly the situation arising out of the Supreme Court judgement quashing the allocation of the coal blocks,” finance minister Arun Jaitley said after the meeting.

State sector requirements, including those of the central and state governments, would be met and coal mines allocated to PSUs such as NTPC or state electricity boards.

“As far as the private sector is concerned, the actual users of coal in the cement, steel and power sectors who apply for a certain number of coal mines will be put in the pool and there would be an e-auction. A sufficient and adequate number of mines would be put so that actual users go back with the mines,” he said.        

Jaitley said the auction process would be “transparent” and completed in “three to four months” with proceeds going entirely to the state governments where the mines are located.

“The entire mess that the UPA had left behind from 2005 onwards over the next four months would be cleaned up,” he said, adding coal worth $20 billion, which was being imported annually, would be domestically substituted through this measure.

The biggest beneficiaries would be the eastern states such as Jharkhand, Odisha, Bengal and Chhattisgarh. States such as Madhya Pradesh, Maharashtra and Andhra Pradesh would also benefit.

“This will financially empower particularly the eastern states (which have most of the coal mines) and lakhs of labourers would get employment while bank capital held up with the allottee companies would be fruitfully utilised,” Jaitley said.

Jaitley vehemently denied a suggestion whether the process could be termed as “de-nationalisation” of the coal sector saying: “The original Nationalisation Act remains and will remain and Coal India Ltd will be fully protected.”

The coal ministry has drafted the ordinance after extensive consultations with attorney-general Mukul Rohatgi.

The issues that need to be resolved by the government in the coal mine case include forfeiting of bank guarantees and title deeds of the land mines purchased by the companies, sources said.

Sources said successful bidders in the fresh auction of coal blocks along with the land and plant standing on it would be liable to pay the earlier allottees the cost of the land and the plant along with 12 per cent annual interest on the amount that was originally invested for purchasing the land and setting up plant.