Strict norms for the proposed competitive bidding process: Coal Ministry

The government will not allow companies, who have failed to develop their allotted coal blocks, to take participate in the proposed competitive bidding process, along with this, it is also considering not to allow, power projects which are already set up or under construction on the basis of coal being a pass through items of cost.  

However, a bidding consortium with a mining company as its member would be given preference in the allotment of a coal block, if its bid is within 10 per cent of the highest offer and is prepared to match it. Simultaneously, on the place of fixed time frame from the allotment coal blocks to the companies, government is planning to link payment schedules to achievement of successive targets in developing such blocks after the issue of letter of intent and mining lease. This is being considered since exploration and development of coal blocks depend on various factors, not all within control of the developer.

The government is thinking over strict measures for introducing competitive bidding process for allotment of coal blocks. Till June 23, central government had allocated around 286 blocks, with reserves of 43,548 million tonnes. However, because of poor performance, of developers in developing these blocks, government had already cancelled 24 coal blocks. Under the chairmanship of Coal Secretary a committee has been formed to make a draft bid document.

A coal ministry official said, “Identification of coal blocks for allocation through competitive bidding will be done after making sure there are no compelling factors, such as presence of wildlife sanctuaries, which will stand in the way of the forest clearance. Time allowed for commissioning of the mines will be suitably revised, taking into account the ground realities in respect of issue of prospecting license, forest and environment clearances and time take for land acquisition and execution of lease agreement. The prospecting license needs to be issued along with the allocation letters for coal blocks.”

The coal ministry official said that the two-year period for completion of exploration would be counted from the date of grant of forest clearance for exploration.

Experts are of the view that, there is a need to strengthen the institutional mechanism and facilitate fast-track clearances for coal mining projects through a single-window inter-ministerial body. The Chairman of CII’s national committee on power and Managing Director of Tata Power, Anil Sardana, made a strong case for competitive bidding of coal blocks by ushering in regime of ‘Production-linked payment on the lines of production sharing contract  successfully done for the New Exploration Licensing Policy on discovery and exploitation of oil and gas reserves. 

The end use plants which are already operational or under construction based on coal linkage from Coal India and Singareni Collieries Company or allocation of captive coal blocks made earlier, would not be allowed to participate in the bidding if the captive blocks allotted do not have the capacity to meet the full requirement of coal for minimum 30 years.

The coal ministry official said a mining company which entered into a long-term agreement for supply of coal to companies in steel, power and cement sectors would be eligible to take part in the bidding process. “A member of the consortium will be allowed the advantage of the strength of its promoters and associate company in the group for meeting the qualification criteria. More important, the basis for selection of the successful bidder will be a combination of fixed price tag and extractable reserves-linked payment,” the coal ministry official added.