Stage set for coal block auctions

Of these 24 coal blocks seven are earmarked for the power sector, 16 for other end-use steel and cement plants as also captive power units, and one coking coal mine.

While the process to e-auction 24 mines kicks off on Thursday, the government has firmed up a blueprint to auction 101 mines in several phases beginning March 2015.

The auctions are expected to boost the coffers of mineral-rich states by Rs 7 lakh crore over the next 30 years.

The Supreme Court had on September 25 cancelled allotment of 204 coal blocks after holding their allocation as arbitrary and illegal.

Justifying re-promulgation of the Coal Mines (Special Provisions) Ordinance 2014, finance minister Arun Jaitley said it had become necessary to do so as a bill enacted to replace the ordinance could not get through the Rajya Sabha owing to the opposition uproar over conversion and other issues.

“With the re-promulgation the unfinished process of allocation of coal blocks will resume again,” Jaitley said.

He added that if Parliament is not allowed to function, the framework of the Constitution has even provided that decision making of the country does not come to a halt. “Stalemate and obstructionism can’t go out in perpetuity,” Jaitley said.

Coal secretary Anil Swarup told The Indian Express that the guidelines incorporated enough safeguards to eliminate possibile cartelisation by big industry players.

“There is no such possibility as companies cannot put up a shadow company to bid for blocks. Companies aspiring to bid for captive mines must prove that they have already invested at least 80 per cent of the total cost of their projects,” Swarup said.

He added that the eastern states would be the biggest beneficiaries in the e-auction exercise as maximum number of blocks are located in that region. As per conservative estimates they stand to gain Rs 7 lakh crore from auction and royalty over the next 30 years.

“One calculation tells us that if the 70 per cent of the mining is for power… and 30 per cent is for non-power and if extractable quantities is about 50 per cent… the total payment to the states in 30 years would be around Rs 3.5 lakh crore from 204 blocks cancelled by the Supreme Court,” Swarup said, adding that another Rs 3.5 lakh crore would flow in as royalty.

The auction would be conducted by state-run MSTC and SBI Cap is the transaction adviser. The whole process will be completed for the operating and to-be-functional mines before March 31, coal minister Piyush Goyal said.