Coal Ministry has issued the draft approach paper today, which has laid out the methodology, formula and eligibility criteria for conducting the first round of coal e-auction.
The Ministry of Coal has invited public comments on draft approach paper, which shall be accepted till 22 Dec, 2014 for framing the tender documents of 92 coal blocks set to be auctioned/ allocated in the first round.
The draft approach paper is for the initial rounds where Schedule II and Schedule III blocks will be offered for auction/ allocation. The coal ministry has to meet the deadline of 16 Mar, 2014 to allocate all the 92 coal blocks through auction and government dispensation. Initially, the ministry had planned to offer 74 blocks in the first round of auction/allocation, but then raised the number to 92. Of the 92, 59 blocks have been kept for the power sector.
The approach paper says:
1. There would be two methods of bidding for auction of coal blocks i.e. forward bidding for unregulated sectors like steel, cement and captive power where INR 150/MT will be the floor price for bidding, wherein the highest bidder wins. And, reverse bidding for specified end use for power generation where INR 100/MT will be the floor price, wherein the lowest bidder wins.
2. The bidders for the running mines should have incurred around 80% expenditure of the total project costs and for the mines that are about to come into production, around 60% expenditure on the total project costs.
3. There would be a ceiling to Coal India prices so that power prices do not go up.
4. If there is surplus coal available, it shall be sold to Coal India at bid price or CIL notified price. Earlier, the government had said that swapping of coal would be allowed, which meant if someone had surplus coal, it could be used for the same companies/ another plant, but no such matter is mentioned in the current document.
5. Companies are not allowed to submit more than one bid for a mine — individually or as a shareholders in a joint venture. Bidding for more than one coal block for the same end-use plant is also not permitted. In the case of a joint venture, a change in composition is also not permitted during the bidding process.
6. According to the Coal Mines (Special Provisions) Ordinance, 2014, Schedule II mines are those, which have already come into production. While, schedule III mines are those, which are ready to come into production. On 24 Sep’14, the Supreme Court de-allocated 204 coal blocks, of these, 42 were already producing, while, another 32 were ready to come into production.
7. Companies will also be required to furnish a performance bank guarantee, which would be valid for two years for Schedule II mines and for Schedule III mines. It will last till the achievement of peak-rated capacity.
8. For schedule II coal mines, in the event of a shortfall in production, the deficit percentage according to the approved mining plan will be deducted from the bank guarantee. For example, if only 80% of the mining plan is achieved, 20% of the bank guarantee will be deducted by the government. A similar methodology has been put in place for Schedule III mines.
The e-auction process will be handled by the public sector company MSTC. The Coal Ministry has also constituted inter-ministerial committee to discuss this approach paper once the stakeholders’ comments come. The committee will be meeting on 19 Dec, 2014 to examine all the comments and then a final technical bill will be floated by the ministry.
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