Notwithstanding the CAG stance favouring the auction route for allocation of natural resources, power companies such as NTPC, Tata Power, Rpower and Jindal Power might get another set of captive coal blocks without having to go through the bidding process.
The new rule on coal block auctions finalised by the coal ministry proposes to carve out a portion of the country?s coal reserves for the power sector that would be offered to companies through state-run corporations. Those companies that have been awarded a power project on the basis of tariff-based competitive bidding would be eligible for this exclusive allocation, official sources said.
Tariff-based bidding has been made mandatory for all power projects awarded after January 2011.
?This is good development and would help companies to offer lowest electricity tariff for consumers,? said an official of a private sector power company asking not to be named as he was not aware of the changes in the regulations.
In a communication to the coal ministry earlier, top officials in the power ministry had stressed on the need to provide captive blocks without auction for all tariff-based projects to keep the competitive process (for power projects allocation) attractive.
As per the rules being finalised in consultation with the state governments, specific areas containing coal blocks would be identified for the power sector. The coal ministry would then fix a reserve price for each coal block and allow state governments and the central power ministry to invite applications from eligible government companies and corporations for the said blocks. The state-owned agencies would then allocate these coal blocks to a company or corporation that have awarded a power project on the basis of competitive bids for tariff.
?The auction process for coal blocks would have ushered in two-stage bidding for the power sector that could prevent discovery of best tariff for power consumers. Under the new mechanism, power companies would know beforehand what kind of resource base they would get with the project and therefore bid aggressively,? said a senior power ministry official requesting anonymity.
Power producers currently participate in tariff-based bidding on the assurance of coal linkage or a captive coal block. Under the bidding route finalised by the government for coal sector, all future coal blocks will be allocated to user industries in the power, cement and steel sectors on the basis of a competitive bidding process. This is expected to increase the cost of fuel for these industries and, in turn, impact final product prices for consumers.
However, analysts feel that discretionary allocation of captive coal blocks to power companies could again become ground for controversy as allegations of favouratism could be levelled against the authorities.