Hoping to draw a bunch of buyers to India’s first auction of coal mines for commercial mining and sale, the Ministry of Coal has liberalized the terms of the qualification. Nonetheless, the final judgment on successful bidders would require government approval.
In the tender document uploaded by the Ministry of Coal for commercial coal auctions, the preferred bidder who submits the highest bid at the auction could lose the race if it ceases to meet the qualification criteria.
In addition, there is no strict eligibility requirement for participation in the auction. Companies / joint ventures are to be registered in India. Bidders who have won coal mines under captive auction and have been convicted of an offense relating to the allocation of coal are not permitted to participate.
“In the event the nominated authority or the central government determines that a preferred bidder should not be declared a successful bidder on account of any reason whatsoever, including without limitation, the withdrawal of the preferred bidder from the auction process for the coal mine or ceasing to comply with the eligibility conditions, the tender process shall stand terminated,” said the tender document.
In the past, when the Ministry of Coal awarded coal mines for captive use, it canceled private companies’ bids, citing them to be too low. This led to legal turmoil.
The auction is a two-part round, technical and financial. The appointed coal auction authority — which is the joint secretary-level official of the Ministry of Coal — will assess the technical offers. The bidders are to submit their eligibility criteria along with an initial offer to the nominated authority.
The round of financial bids consists of two stages; the initial offer of technically qualified bidders is classified in descending order for the determination of qualified bidders. These qualified bidders are entitled to participate in the e-auction and to apply their final offer. The highest bidder for a mine selected for evaluation by the government is considered a good bidder.
However, the tender document suggested that the appointed authority “reserves the right (without incurring any liability whatsoever) to reject all or any of the bidders/bids without assigning any reason whatsoever”. One bid per company for a mine is allowed.
There is no restriction on the sale and consumption of coal. “The coal produced from the coal mine may be sold by the successful bidder in any manner as may be decided by the successful bidder, including sale to affiliates and related parties, utilisation of coal for any purpose, including but not limited to captive consumption, coal gasification, coal liquefaction, and export of coal,” said the tender document.
In a presentation, the coal ministry official said the mines on offer were a mixture of small and large mines in order to cater to all kinds of players, especially non-mining companies. Of the 41 mines on sale, 11 are in Madhya Pradesh, 9 are in Chhattisgarh, Jharkhand and Odisha, and 3 are in Maharashtra. The total geological reserve for the mines is 16,979 million tonnes.
“Currently of the 41, seven mines have environment clearance and six have forest clearance. Land acquisition has been done in 12 mines and there are five mines already in production which are being auctioned,” said the coal ministry.
The Center expects an annual combined revenue of Rs 20,000 crore from the sale of 41 mines to the mining-bearing states. The updated approach also specifies that the bid parameter should be in the ‘revenue-share’ setting. The bidders will be required to bid a percentage of the revenue payable to the state government from the production and sale of coal mined. The price of the floor is held at 4% of the revenue share.
The price of coal extracted will be calculated by the National Coal Index (NCI) defined by the Ministry of Coal. The NCI will have a benchmark linked to the market, said the Ministry of Coal. The Center will also provide rebates on revenue payments in the event of early production and use of clean coal technologies.
Miners will have the freedom to explore coal-bed methane, coal gasification, and minor minerals at the coal mining site.
