Assam emerges as a strong player in coal mine auctions

Coal mining auctions seems to be seeing States competing with each other to get a mine. In the latest – eighth and ninth round of auctions, Assam seems to be an aggressive bidder and has got three mines under its belt. As the States and State-owned entities along with a few private sector players battle it out at the auctions, West Bengal is finding the going slightly tough.

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Critics’ term it is political, but a senior official in the Coal Ministry told businessline that, West Ben­gal Power Devel­op­ment Cor­po­ra­tion Lim­ited (WBPDCL) is not qualified to participate in the auction. In fact, the Ministry on March 4 had termed any allegations of manipulation by the Ministry to disqualify WBPDCL as baseless.

According to WBPDCL Chairman & Managing Director P. B. Salim, “We should be eligible to participate in auctions to get additional coal mines. The Centre does auctions in batches– some mines are in Bengal, some mines are in Odisha and some are in Jharkhand. Looking at the mines which are under auctions, if they are suitable for us in terms of economic feasibility, logistics and distance, then we would participate.”

Elaborating he said, “If the mine concerned is situated far from the state, then the transportation cost would be high and it may not be economically feasible. Purchasing coal from Coal India would be profitable in this case rather than participating in the auction.”

On whether WBPDCL is looking at any particular mine through auctions, Salim said, “We will participate once the list is available.”

According to a Coal Ministry official, seven rounds of commercial coal mine auctions have been completed and a total of 91 coal mines have been successfully auctioned. The 8th and 9th round of auction is going on. Of the blocks under hammer, there are 31 mines which were allocated but since have been terminated or surrendered.

Asked what has worked for a rather smooth auction, the official said, it is because of the tranche wise reforms which the Ministry has undertaken. Introduction of Market-linked Transparent Allocation Mechanism Shift from the notified price regime to National Coal Index (comprising of three components viz. notified price of Coal India Limited, auction price and imported price channel) has made it attractive.

Others include no stipulation of technical or financial eligibility criteria to enable wider participation (domestic and international as 100 per cent FDI under automatic route is permitted for sale of coal) and create competition.  Migration to per cent revenue sharing mechanism instead of fixed ₹/tonne based auction -Floor Price for the auction process has been kept reasonable at 4 per cent of revenue share to attract participation (i.e. equivalent to ₹50-₹85/tonne for G9-G14 grade of coal) as compared to ₹150/tonne of coal in the previous regime. The requirement of minimum number of Technically Qualified Bidders for continuing the auction process has been brought down to two, instead of three earlier; Reduced/ Optimised Payments and Guarantees.

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Besides, these incentives for promoting early production and clean technology along with the objective of bringing maximum coal to the market at the earliest possible and to promote the use of clean technology, has also proved to be an attraction.

To make it investor friendly, the Ministry has simplified and made the terms and conditions flexible.