Commercial coal mining: Lower risks to investors in second round of auction

By: |
February 9, 2021 12:15 AM

The Union coal ministry is planning to offer 64 new mines, with reserves of 30,505 million tonnes (MT) of the fuel, for the second tranche of the commercial coal auctions.

The maiden auction under the commercial coal mining policy saw aggressive bidding by domestic and home-grown firms, with the highest premium received was 66.8% while the average premium quoted was 29%.The maiden auction under the commercial coal mining policy saw aggressive bidding by domestic and home-grown firms, with the highest premium received was 66.8% while the average premium quoted was 29%.

While the first round of auction under the new commercial coal mining policy in November last year elicited only modest response, the government has re-packaged the blocks on offer under the second round by minimising the risks to potential investors.

The Union coal ministry is planning to offer 64 new mines, with reserves of 30,505 million tonnes (MT) of the fuel, for the second tranche of the commercial coal auctions. To allay the fears of investors regarding environmental norms, the government has excluded mines falling in wildlife reserves and blocks in areas where there is more than 40% green cover.

The mines to be tentatively offered comprise about 9% of the 3.4 lakh MT of total coal reserve in the country. State-run Coal India owns blocks with combined reserves of 60,000 MT.

The largest number of mines offered in the upcoming auction are located in Jharkhand (15), followed by Odisha (14), Chhattisgarh (12) and Madhya Pradesh (10).

Stakeholders have been asked to submit their queries regarding the blocks by February 24. Mines currently under litigation or overlapping with active coal-bed methane blocks have also not been included in the latest list. This would also be the second set of coal assets to be auctioned off through the new market-determined revenue share model that replaced the fixed fee/tonne regime that had earlier turned off private investors. For the unexplored assets, and the investors will enjoy certainty of tenure from the prospecting to the production stages.

The government had identified 41 blocks for the first round of commercial coal auctions, but after objections from Maharashtra, Chattisgarh and Jharkhand, only 38 mines were put on auction. Even though financial bids were received for 19 mines in the first round, the success rate was better than the previous ten auctions, under the earlier regime, where bids were received for only 35 mines out of the 116 offered.

The maiden auction under the commercial coal mining policy saw aggressive bidding by domestic and home-grown firms, with the highest premium received was 66.8% while the average premium quoted was 29%.

Almost 65% bidders were from the ‘non-end user’ category such as real estate, infrastructure and pharma. Apart from the bigger names like Aditya Birla, Adani Enterprises, Vedanta and Jindal Power, successful bidders in the first round included Aurobindo Realty, Boulder Stone Mart and Chowgule and Company. The absence of global mining giants such as BHP Billiton, Rio Tinto and Glencore were conspicuous as these companies are gradually withdrawing from the coal industry.

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