Govt kickstarts coal mine auction process after Cabinet nod for relaxed norms

The Centre is set to initiate the sixth and seventh rounds of coal mine auction, which were delayed on account of slowdown and inadequate demand, at the beginning of the next financial year.

The groundwork has begun with the government looking to appoint a transaction advisor for the auction process.

The coal ministry has recently floated a request for proposal (RFP) for advisor who would oversee the deals and the appointment would be finalised by the beginning of April, RFP documents for such prospective bidders show.

This move follows a Cabinet decision last month to relax the norms of the auction by allowing successful bidders to sell a part of production in the open market.

"The nominated authority under the Coal Mines (Special Provisions) Act, 2015 and the Central Government under the Mines and Minerals (Regulation and Development) Act are considering allotment and auction of coal mines and coal blocks for which a transaction advisor would be selected," it said.

The government conducted first-ever coal mine auction in 2015 after the Supreme Court in its landmark 2014 ruling cancelled the previous allocations to the private sector.

The frenzy to grab coal mines slowed down in subsequent tranches of auctions partly due to a slowdown in the economy and partly because of excess supplies of such mines in the market.

This forced the government to keep delaying the combined auction of sixth and seventh tranches, which were initially planned to get completed by December last year.

On February 20, in a bid to make the auctions attractive, the Cabinet Committee on Economic Affairs approved a methodology for allowing the allocatee of mines meant for captive use to sell 25% of production in open market with payment of additional premium on such sale.

As the government wasn't sure the latest round of auction would lead to better prices for the mines on offer, the auction dates were postponed several times by the state-owned auctioneer MSTC Ltd, which would be conducting the auction electronically.

Under the provisions of the Coal Mines (Special Provisions) Act, 2015 so far 85 coal mines have been successfully allocated. Of these 85 coal mines, 25 have been allocated through electronic auction and 60 have been allocated to government companies through allotment.

In the sixth and seventh rounds, the government is offering 13 thermal coal mines that have a combined peak rated capacity (PRC) of 22.31 million tonne. Six coking coal mines with a combined annual capacity of 12.63 million tonne are also up for grabs.

Among these mines, the largest thermal coal asset is Gare Palma IV/1 located at Chhattisgarh, having PRC of six million tonne.

The tender documents for these 19 mines are believed to have elicited a significant response from the private sector after the last two tranches for 15 mines had to be cancelled as they could not get many bidders to participate.

The lastest round of auction comes at a time when there is a surge in imports, mainly due to a sharp rise in power demand with domestic supplies from Coal India Ltd failing to keep pace with rising domestic demand.

Coal India's own production from existing mines till the first nine months of the fiscal year has grown by about 7%, lower than the rise in thermal power demand.

WHAT'S ON OFFER:

• 13 – Thermal coal mines
   
• 22.31 mt – Their peak rated capacity
   
• 6 – Coking coal mines
   
• 12.63 mt – Their combined annual capacity