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  3. Delay in green nod before coal blocks auction may holdup bidding further

Delay in green nod before coal blocks auction may holdup bidding further

19 Dec 2012 Evaluate

The Coal Ministry’s target to auction 54 coal mines only after taking clearances from the environment and forest department is expected to delay the bidding process further. Last week, the Coal Ministry discussed the issue with the power and steel ministries and other stakeholders.

Both the Ministries, along with private power producers and the Sponge Iron Manufacturers Association, felt that the coal blocks for auction should come up with all approvals in place at least with regard to the in-principle forest clearance. Further, the need of to set up a specialized department that will be aimed to take the approvals for all coal blocks, was also highlighted.

Learning from the flop-show of the 2G telecom spectrum licence auction, the government has firmed up that the coal blocks loaded with ‘in-principle’ clearances would fetch a better floor price, since receiving the green nod was proving to be a major roadblock.

Normally, key stages in the development of a mine include submission of the mine plan and its approval, along with forest and environment clearance and land acquisition. Of these, getting forest and environment clearances and land acquisition have been the toughest for both public and private companies.

However, the government can place the blocks on auction without forest and environment clearances, but the process would be dampener. Since the bidder would be asked to pay 25% of the bid amount upfront and another 25% after the mine plan approval, which would mean by the time the bidding company puts up an application for required clearances, it would have to pay 50% of the bid amount.

On the other hand, if the company does not get the environment or forest clearance, the money paid by the bidder will need to be returned and if the area of the block is reduced due to forest clearance, the bid amount needs to be re-negotiated.

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