Putting to end the uncertainty on coal mining in the country, the Centre on Monday decided to promulgate an Ordinance to allow e-auction of blocks to the end users.
The end users in round one of the auctions will be power, steel and cement. But the Government has also left an enabling provision in the Ordinance by which it can decide on additional commercial use at a later date.
The Supreme Court judgment of September 24, cancelling all coal block allocations between 1993 and 2010, which will lead to complete de-allocation of 204 blocks by March 31, 2015, had left the Government with little time to put in place a foolproof system.
“The will clear the problem created by coal blocks being allocated through a screening committee mechanism.
“The Ordinance will also resolve the pending issues arising out of the Supreme Court judgment quashing the previous coal block allocations. The Ordinance will be sent to President Pranab Mukherjee tonight. But the Coal Mines Nationalisation Act remains intact,” said Finance Minister Arun Jaitley, briefing presspersons after a Cabinet meeting in New Delhi.
To expedite process Jaitley said the process will be completed expeditiously, within the next three-four months. The proceeds from the e-auction will go to the State Government where the coal mines are located.
“By doing this we will be financially empowering the States, enabling bank capital that has been tied up to be used fruitfully and give an impetus to the manufacturing sector,” the Finance Minister said.
To begin the process of auctions, end-users in the power, cement and steel sectors will have to put in their requirements and a sufficient number of mines will be put for auction, in a pool.
Companies being investigated for irregularities in previous coal block allocations will also be allowed to bid in the e-auctions but the mines will only be for captive use, said Piyush Goyal, Minister of State (Independent Charge) Power, Coal and New and Renewable Energy.
“The floor price will be determined by a committee to be set up. There will be no right of first refusal for anybody,” Goyal added. Joint ventures will also be allowed in the e-auction process, the Coal Minister said.
Compensation In the case of 37 mines which are producing, five that are about to start operations and 32 where significant development work has happened, the winning bidders will need to pay a compensation amount to the existing allocatee.
While the private sector will bid for the blocks, NTPC and State Electricity Boards will be allocated blocks as per their requirement.
Both Jaitley and Goyal said the structure of Coal India will remain unaltered. “Coal India has 200 mines where no work has happened. E-auction will expedite production from such mines,” said Goyal.
Currently, nearly $20 billion tonnes of coal is imported and this can come down if the mines start production after the e-auctions, said Jaitley.