In the joint venture, MSEB will pick up 26 per cent equity, and the balance will be held by the joint-venture partner.

Mantralaya sources told The Financial Express that the proposal was cleared by the state cabinet which met on Tuesday for the first time after the relaxation of the model code of conduct. MSEB has appointed Crisil as its advisor for preparing the tender document. The partner will be selected after floating the tender.

The partner will have to provide cost-effective, good-quality coal, while it will be MSEB's responsibility to explore, develop and run the coal mines. State energy department feels that such a project will be viable with a coal mine with reserves of 50 million tonnes.

The sources said the selection of the partner would be done in a transparent manner. The partner should have enough experience in mineral production of at least 10 million tonnes, and its turnover must be about Rs 100 crore in the last three years. The partnership agreement and support deal will be signed between MSEB and the partner, whose equity will not be less.

MSEB will assist the partner in getting clearances, mainly from the Centre and its various undertakings, for the allotment of mining blocks on lease. MSEB will also help in land acquisition for mining purpose from the state government and the rehabilitation of the affected people.

Top MSEB sources said a Rs 400-crore investment was needed for the production of two million tonnes of coal per annum through a coal mine with reserves of 50 million tonnes.

According to them, the share capital will be raised by the partner, and the debt-equity ratio will be 60:40. The energy department, headed by deputy chief minister Gopinath Munde, while presenting the proposal has said that the state will get a royalty of Rs 70 per tonne with the development of the coal mines.

The department, while emphasising the need for developing coal mines through a joint-venture company, said that it would reduce the transportation cost and the price of coal.

INSIGHT
MSEB will benefit

To save Western Coal Fields, owned by subsidiary of Coal India, MSEB was forced to buy coal at a higher price. Hence, when the coal supply begins from the joint venture, MSEB will benefit. In Gujarat, for example, GEB is exempted from the lignite price hike by another state-owned company GMDC. The same can be expected in this case also. The rate of return given to the developer has also been accorded to GIPCL of Gujarat for captive lignite mining.

-- Urmik Chhaya