The Government has added nine more coal blocks to the 92 being offered under the first bidding rounds, taking the total to 101. This is nearly half of the 204 mines de-allocated by the Supreme Court on September 24.
“Initially, we were looking to offer 74, but seeing the requirements we have decided to add 27 more blocks. Of these 101 blocks, 65 have been kept for the auction and remaining will be allocated to public sector entities,” a senior Government official said.
While, all statutory clearances, including environment, is in place for 74 blocks (42 already in operation and 32 ready for production), some blocks from the remaining 27 require environment clearances. “We are trying to get all approvals, so that even these blocks meet the auction/allocation timeline of March 2015,” the official added.
Of these 101, the Government has decided to keep 63 for the power sector and 38 for non-regulated sectors such as cement and iron & steel.
Meanwhile, the Coal Ministry has put out a draft approach paper, which would form the basis of the tender document for the 65 blocks to go under the hammer. The approach paper is available on the Ministry of Coal's website and December 22 is the last day for sending in comments.
"The approach paper is for the initial rounds where Schedule II and Schedule III blocks will be offered for auction/allocation," said the official.
According to the Coal Mines (Special Provisions) Ordinance, 2014, Schedule II mines are those which have already come into production, while schedule III mines are those which are ready to come into production. Schedule I includes all the de-allocated coal blocks.
The approach paper makes it clear that for blocks being auctioned to companies where end-use is specified as power a reverse bidding mechanism will be used wherein the lowest bidder wins, and for other sectors a forward bidding mechanism will be used wherein the highest bidder wins.
The e-auction process will be handled by the public sector company MSTC Ltd.
In the approach paper, the Ministry has proposed that companies cannot make multiple bids for a single mine. Explaining, the official said, whether independently or through joint venture, only one bid can be made for a mine.
Bidding for more than one coal block for the same end-use plant is also not permitted in the approach paper. However, the Ministry is open to revising this provision.
“There may be a case where one mine is not enough for the plant. We can have a relook at the provision preventing companies from bidding for more than one mine for the same end-use plant,” the official said.
While a change in the controlling interest of the successful bidder is allowed, the Ministry proposes to prevent them from transferring the mining lease to a third party. The successful bidders will be free to appoint a mine developer-cum-operator.
Companies will also be required to furnish a performance bank guarantee, which would be valid for two years for Schedule II mines, and for Schedule III mines it will last till the achievement of peak rated capacity.
For schedule II coal mines, in the event of a shortfall in production, the deficit percentage as per the approved mining plan will be deducted from the bank guarantee. For example if only 80 per cent of the mining plan is achieved, then 20 per cent of the bank guarantee will be deducted by the Government. A similar methodology has been put in place for Schedule III mines.