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Coal Ministry proposes Rs 150/tonne floor price for auctioning mines

09 Dec 2014 Evaluate

Coal Ministry has proposed a minimum floor price of Rs 150 per tonne for auctioning coal mines to steel, cement as well as captive power plants and a reserve price of Rs 100 a tonne for mines to be allotted to government companies and power stations through the reverse auction method. 

According to proposal, the final floor and reserve price will be different for each block depending on the grade of the coal, using Coal India’s notified price for various types of the fuel. The floor price of the blocks would be worked out by computing their net present value (NPV) through the discounted cash flow method. Winners from steel, sponge iron and captive power plant industries would have to pay 10% of the floor price upfront. The ministry also suggested a cap on the auction price for the blocks being auctioned to the power sector where capacity has been set up under tariff-based bidding and with a cost-plus power purchase agreement.

The government is set to auction coal blocks, including operational and several others close to production, after the Supreme Court in September cancelled all mine allotments since 1993. The government will offer around 92 blocks during the first round of auction of which 59 have been reserved for the power sector. Of these 59, 25 blocks will be put out on auction and 34 will be allocated to Central and State public sector firms.

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