State-owned power sector lending agency Power Finance Corporation (PFC) may be selected as the nodal agency for auctioning of coal blocks for captive use as the government looks at harnessing the company’s expertise in such bidding process as demonstrated in the award of ultra mega power projects (UMPP).
PFC had earlier awarded four UMPPs, two of which required clearance related to captive coal blocks as well. Besides, PFC is also in the process of selecting a coal block developer through international competitive bidding (ICB) for the yet to be awarded UMPP at Bedabahal in Odisha.
Apart from PFC, Coal India and Rural Electrification Corporation (REC) were also considered for the job but the coal ministry has zeroed in on PFC.
?We have not been intimated about the new role by the government. But the company is geared to streamline the process of coal block auction,? said an official in PFC who did not wish to be named.
The government has decided to entrust the job of awarding coal blocks under the auction route to a specialised agency after its attempts to do the job on its own fell flat. Last week, power and coal minister Piyush Goyal announced cancellation of the auction of three blocks suggesting that issues concerning prior clearances needed to be revisited.
The UPA had in February issued notice inviting applications, offering three coal blocks for mining to companies engaged in production of steel, cement and sponge iron. But while Andal Babuisol coal block in West Bengal reserved for sponge iron players received only two bids, two other blocks in Jharkhand ? Jhirki and Jhirki (West) ? did not get even a single bid.
As the nodal agency for auction of coal blocks, PFC may be required to undertake acquisition of land and take environment and forest clearances for coal mining prior to inviting bids. This would ensure that the blocks attract maximum interest from prospective bidders (higher bids) as clearance often delays projects and makes it difficult for investors to correctly value projects.
The government is likely to auction at least six explored blocks with estimated reserves of over 2,000 million tonne over the next few months to meet the requirements of steel, power and cement sectors.
The new policy on auction of coal blocks provides for production-linked payment on a rupee per tonne basis, plus a basic upfront payment of 10%t of the intrinsic value of the coal block. The intrinsic value will be calculated on the basis of net present value of the block, arrived at through the discounted cash flow method. For the regulated power sector, a 90% discount will be provided on the intrinsic value to help rationalise power tariffs.