New round of coal auction with old and rejected mines, same problems

The Centre has announced two new rounds of coal auction, after two failed attempts in 2016-17, to allot mines to iron, steel, cement, fertilisers and captive power units. Unlike the successful first three rounds of the coal auction in 2015, there is no mine offered for the power generation sector.

To attract bidders this time, the time period to get all clearances and begin actual production has been relaxed to 66 months from earlier 44. The earlier allotted mines faced delays due to a slow pace of receiving clearances from mine-bearing states. 

Also, the companies would now be required to produce 80 per cent of the annual committed production during the first five years. It was earlier required that the meet their production target in full. Officials said the extended time period would not impact the revenue going to states during the contract period since they would have to make up for the lesser production. It would only defer penalty on mine owner.

For the upcoming two rounds of the auction of coal mines, the Centre has notified 18 mines of which 14 are the ones which were put up for auction and didn't elicit any interest. 

In a marked shift from the earlier regime, the Centre has made two major changes in the coal allotment policy. First, the mine winners would be allowed to sell up to 25 per cent of the coal, if it is surplus, in the open market.  

The last two tranches of the auction in 2016-17 were cancelled after no buyer came up. The mines were put for non-power sector. Steel sector said the mines are not large enough. The sector itself was undergoing stress and could not bid for new mines. Some mines were undergoing litigation. 

“There is obviously a demand for coal now after 1.5 years. Time was taken in revising the tender document,” said a senior coal ministry official.

Post a judgment of Supreme Court in August 2014 cancelling all coal blocks allocation of past two decades, the ministry of coal started re-allocation through transparent e-auctions. It allocated 86 coal mines to private companies through auction and to states through allotment – for both power and non-power sector. The revenue estimated to be collected is Rs 2.85 trillion over 30 years for mine bearing states. 

In the first-ever e-auction of coal blocks in 2014, 34 coal blocks in three tranches went to private companies including HINDALCO, BALCO, Jindal, JSW, Adani, GMR, Essar among others. Later, five mine allocations were cancelled.

A senior coal ministry official said the coal production could have been better had the coal blocks allocated to central public sector units adhered to the production schedule. “Central PSUs namely NTPC and SAIL have been behind schedule on production targets in many of the blocks allotted to them thus leading to more import of coal for power and coking coal imports,” he said.

The latest tranche of coal auction is coming at a time when power plants and non-power sector are raising questions over the production of CIL. The coal ministry, however, said the coal production is on track and the current tranche of the auction is to reduce imports. 

In the data shared by the ministry, coal production has increased to 676 million tonne (MT) in 2017-18 against 565.77 MT in 2013-14. “While the production target of CIL was 610 MT for 2018-19, it has been asked by the ministry to have an aspiration target of 652 MT,” said an official.

He also said CIL registered double digit 10.6 per cent growth in H1FY19, which is a first for the company. The official added that the through these mines, India would achieve the target of 1 billion tonne coal, earlier envisaged only for CIL.