The Cabinet Committee on Economic Affairs, chaired by Honorable Prime Minister Shri Narendra Modi has approved the methodology for allowing the owner of the captive coal mines to sell 25% of actual production in open market.
The methodology provides that, in case of captive coal mines earmarked for specified end uses or own consumption, the owner are mandated to utilise a minimum of 75% of its actual production (ROM basis) in specified end use plants and are allowed to sell up to 25% in open market with payment of additional premium on such sale under the coal mine.
In case of coal block auctions, the successful bidder shall be required to pay an additional premium of 15% of its final bid price on per tonne basis, for the actual quantity of coal sold in open market. The additional premium will be over and above the final bid price.
While in case of allotments, the successful bidder shall be required to pay an additional reserve price of 15% of the Reserve Price, for the actual quantity of coal sold in open market. The additional reserve price will be over and above the Reserve Price.
Background:
At present, the owner of captive coal mines for specified end use or own consumption are not permitted to sell coal in open market.
As per existing conditions, any coal which is extracted in excess of the requirement of the owner of the captive mine is required to be supplied to CIL at a price less than 15% of the notified price by CIL. Moreover, the sale volume must not exceed 50% of the annual coal production from the mine.
The new methodology is aimed to address the issue of lack of response from the bidders as it sought to increase cost effectiveness of the captive coal mines.
Notably, the fourth and fifth tranche of coal block auction were ultimately annulled due to lack of response among the bidders.
The Coal Ministry had made the provision of coal sales in open market in its tender document for the upcoming 6th and 7th round of coal auction, which now has been duly approved by the cabinet committee.
The new methodology is likely to make the on-going and future tranches of auction and allotment attractive and commercially viable and would increase the competition in the auction process.
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