Competitive bidding for coal blocks proposed

Mumbai, Apr 29 | Updated: Apr 30 2007, 05:30am hrs
After putting power generation projects under competitive bidding, the Centre is actively considering auctioning of coal blocks for captive purposes through competitive bidding. This is to bring in the much-needed transparency in the coal block allocation process.

Informed sources told FE: The ministry of mines has already mooted the proposal and forwarded it to the Centre for future action. This is necessary as with the progressive allocation of coal blocks, the number of coal blocks available are declin)ing, while the number of applicants per block is increasing as the demand for coal is increasing continuously. As reported in FE, the coal ministry has recently received over 1,400 applications for 38 coal blocks with coal reserves of more than 6,000 million tonnes for captive purposes. Sources said, at present coal blocks for captive minning are awarded on evaluation by a screening committee set up by the coal ministry, which has till now allotted 123 coal blocks. So far, the committee has de-allocated three blocks. An official from a state-run power generation company, on condition of anonymity, said the competitive bidding would be done in two parts -technical and commercial bids. The technical bid would be qualifying in nature while in case of commercial bid the applicant would have to indicate a lumpsum amount that he is willing to offer to the government. The bid with the highest value would be declared successful. The official said that preference would be given to a company which proposes to set up the end-use industry in the state in which the coal block is located if its bid is within 5% of the highest bid for the said block and the company is willing to match the highest bid.

According to sources, the Centre proposes a rider if the mine and the end-use project are not developed in time, the allocation of the block would automatically stand de-allocated and the upfront payment of the bid amount made by the allocatee forefeited. Moreover, the ministry has suggested that the receipts generated by competitive bidding should accrue to the state government where the coal block is located.

This would help subsidise concerns that coal mining activity results in serious damage to the social and economic life of coal residents in that area and to the degradation of the environment.