Brushing aside opposition from thermal power, steel and captive electricity plants, the coal ministry has issued an addendum saying firms bidding for coal blocks will have to pay the initial price offer (IPO) during the technical bid process.
The successful bidders should also be prepared to pay for any “additional premium” if the government deems it necessary for them to do so.
The bidders are protesting that they have to indicate an IPO during the technical bid stage rather than during financial bid. In a meeting with ministry officials on January 11, CEOs of leading firms reasoned that seeking an IPO during the technical stage amounted to double price bids as they would have to make a competitive bid during the financial bid stage too.
But the ministry hardened its position on Saturday and issued an addendum saying IPO is there to stay besides the financial bid. It is learnt that the ministry is undecided on the modalities of additional premium and is seeking expert opinion on ways to fix it.
Suggesting that the coal-starved power plants are willing to walk an extra mile for getting assured fuel supply, Essar Power CEO Sushil Maroo said, “People have little option but to pay this additional premium to protect their existing investment.”
According to a preliminary formula being worked out by the ministry, additional premium meant money equivalent to bid amount of per tonne of coal of a block, which a successful bidder had quoted during the financial bid.
Industry body Assocham had earlier recommended that there should be no IPO and all bidders found qualified should be allowed to bid in the coal auction process. Ashok Khurana, secretary general of the association of power producers (APP) said power companies are opposed to an IPO and on their behalf the APP has written to power minister Piyush Goyal opposing it.
“All bidders and respective associations have voiced their concern on the concept of IPO as it can lead to unintended consequences and may distort the bidding process,” Ashok Khurana, secretary general of the association of power producers (APP) told The Indian Express.
However, a coal ministry official countered the contention of the prospective bidders saying that the additional premium concept has been done at their insistence, who in their eagerness to win bids and secure coal for their stranded plants have volunteered to pay the additional premium.
Coal blocks auction
* The coal ministry has issued an addendum saying firms bidding for coal blocks will have to pay the IPO during the technical bid process
* Also, the successful bidders should be prepared to pay for any “additional premium” if the Centre deems it necessary to do so