The Government has decided to allow companies without prior mining experience to bid for the proposed auction of captive coal blocks .
“The Coal Ministry is of the view that blocks are given to the end-use companies whose principal field of expertise is the operation of end-use plant. Moreover, mining operations can be outsourced to professional miners,” said a senior Ministry official who is privy to the ongoing discussions for the auction.
Making prior experience in mining mandatory may whittle down the competition as promoters of all end-use plants will not qualify, he added.
Parameters
The Ministry has also set a condition that sponge iron, steel and cement companies can bid for a captive mine only when the detailed project report of the project, along with clearance from Ministry of Environment and Forests, is obtained.
“The company will have to complete financial closure within 6 months of mine allocation, else it (the mine) will be de-allocated,” said the official.
NET WORTH
The Coal Ministry is being extra cautious while determining the financial net worth of companies who would qualify for bidding. In the alleged coal-allocation scam, the Central Bureau of Investigation (CBI) has found that several companies had submitted false statements and shown joint ventures displaying higher financial strength.
This time, the bidder will have to submit evidence to show sourcing of funds for the equity part of the capital expenditure for the end-use project plus floor price of the bid and development cost of the mine.
“The bidder may be developing other plants. So, it is important to see the financial strength for the pit-head project,” said the official.
FORMING CONSORTIUM
The Government would allow only those consortiums to participate in auctioning where each partner meets the qualifications individually. Each consortium member should have minimum 20 per cent participation. The lead company must have at least 26 per cent stake in the joint venture.
However, there are no restrictions on number of companies forming a single consortium. But, there would be a lock-in period for any consortium partner to exit from the project.
The Coal Ministry is of the view that forming consortium just to show financial strength may lead to discrepancies. At the same time, it would open doors to firms that do not have experience, either in end-use project or coal mining.
GREEN NOD
CRISIL Infrastructure Advisory, which is in the process of drafting a methodology for auction, has been asked to discuss with the Environment Ministry and the Department of Telecom for any possibility of in-principle clearances for coal blocks and the latter’s experience of setting up a floor price in the case of the 2G auction.