Government release draft approach Paper for e-auctioning of coal mines

Government has released a draft ‘approach paper’ for e- auctioning of the coal mines.   This approach paper will open for public consultation till 22nd December.
The approach paper includes details about the procedure for the auction of Schedule II & Schedule III blocks which is specified in the Coal Mines (Special Provisions) Ordinance 2014.
Central government is planning to conduct two-stage bidding under this ordinance. In the first phase of e-auction, 92 blocks will be auctioned.
Key facts

• Reverse and forward bidding: The e-auction will take place in reverse and forward bidding. There will be tariff based reverse bidding where the end use is generation of power and forward bidding for production of steel, cement and power generation for captive use. Thus auction procedure will be different for power and non-power companies.
• Potential bidders: Potential bidders after being eligible in the technical stage would be allowed to participate in the e-auction and submit price offers. They will be pre-qualified bidders and selected from top 50 per cent of technical stage.
• Technical stage: The potential bidders have to go technical eligibility and have to meet criteria of end-usage of coal, amount of coal needed for same and distance of end-use plant to the mine and the completion status of the same.
• Indicative price: Bidders shall offer bid price per tonne of the coal produced. Such bid price shall be above the floor price in case of forward bidding or below the ceiling price in case of reverse bidding.
• Ceiling price: On fixing the ceiling price for coal mines to be auctioned for power projects having cost—plus power purchase agreements, a ceiling price of the prevailing CIL notified price for each coal mine will be fixed and the bidder will be mandated to quote lower than this ceiling price. It will help power sector bidders to prevent shooting up of power tariff.
• Reserve price: The reserve price for blocks to be auctioned for power projects will be fixed at Rs. 100/tonne.

Background
In September 2014, Supreme Court had cancelled the allotment of 214 coal mines to various companies since 1993, saying the process used to assign coal licences by successive governments was “arbitrary and illegal.”
In October, in this regard government has issued an ordinance to facilitate fresh allotment through auction.
Thus by releasing the draft approach paper, government is aiming to create a speedy and proper way for auctioning and allotment of 214 coal blocks which were cancelled by the Supreme Court.

Month: Current Affairs - December, 2014