Somewhat bucking the aggressive trend seen in the bidding for coal blocks reserved for the regulated power sector, Jindal Steel and Power’s subsidiary Jindal Power (JPL) on Thursday won the Gare Palma IV/2 and 3 mines in Chhattisgarh previously held by it for R108 per tonne, the lowest successful bid in the sector so far.
This is the sixth and the last among the blocks meant for the power sector in the initial lot of 42 mines being auctioned, all producing ones. The other five blocks had gone to power companies with the wining bids ranging from R470 to 1,110 per tonne. Even though the process was originally planned to be of reverse bidding with the fuel charge ceiling being Coal India’s price, all the bids, including the latest for Gare Palma IV/2 and 3, had turned out to be forward bidding after bid prices hit zero due to the keen interest shown by companies with power plants in eastern India.
JPL’s wining price for the Gare Palma IV/2 and 3 blocks, with extractable reserves of 155 million tonnes, was relatively lower because competitors like Adani Power and GMR Energy, with plants located at quite a distance from the pithead, chose to give up due to possible high transportation costs.
Given that the government has reiterated its promise that the auction process is designed not to inflate the power tariff, the power companies cannot really expect to benefit from any upward revision in fixed costs later.
Going by the bid price, JPL will pay the Chhattisgarh government only Rs 1,680 crore over a period of 30 days. This is in contrast with the Tokisud North block in Jharkhand, with reserves roughly a third of Gare Palma IV/2 and 3, which was bagged by Essar Energy MP for Rs 1,110 a tonne.
Late on Wednesday, Hindalco Industries had won another block in Chhattisgarh (Gare Palma IV/5, reserved for steel) at Rs 3,502 per tonne, the highest bid price so far. The Aditya Birla Group firm will have to shell out Rs 14,860 crore over the next three decades to the state government.
While bidding for the Bicharpur mine in Madhya Pradesh was still under way — the mine had received a bid of Rs 2833 a tonne at the time of going to press — the total number of blocks won by the companies had reached 15. The Bicharpur mine was previously held by Madhya Pradesh State Mining Corporation and has an extractable reserve of 29.12 million tonnes.
Meanwhile, the potentially high revenue streams to eastern states where the auctioned coal mines are located (Chhattisgarh, Jharkhand, Madhya Pradesh and Odisha) have triggered a debate in political circles about the Comptroller and Auditor General’s estimate of the “losses” to the exchequer from allocation of mines sans auction under the UPA government. “Certainly the CAG’s position has been vindicated but I am underlining the larger issue here… Our position has been vindicated,” Commerce and industry minister Nirmala Sitharaman told reporters on the sidelines of an event.
JPL, which had held the Gare Palma IV/2 and 3 mines before their allotment was cancelled by the Supreme Court, feeds its 1,000 MW Tamnar thermal power plant in Raigarh from these mines.
Additionally, the company is also implementing two more part-operational power plants of 1,200 MW each at the same location. As per the rules of the auction, excess coal from a mine can be used to feed the same end-use plant of a company.
JPL has tied up buyers for 1,150 MW of the existing capacities at Tamnar. It was chosen as the successful bidder for supply of 450 MW of power to Kerala. It also has a long-term power purchase agreement of 500 MW and medium-term 200 MW PPA of five years with Tamil Nadu.