Government announces draft rules for e-auction of coal blocks

The government today announced draft rules for the e-auction of coal blocks whose allocation was cancelled by the Supreme Court. The coal ministry proposes to allocate 72 coal blocks to specified end-users through e-auctions, coal secretary Anil Swarup said.

He made it clear that the auction would not be a "revenue maximising exercise" and that the government wants to ensure that power tariffs do not rise after the auction.

There will be a cap on the number of blocks one entity can bid for so as to ensure that coal blocks are not monopolised, he said. This would limit the amount of coal a company can get in the auction, which will be a two-step electronic process.

The auction rules would be notified next week, after various stakeholders had provided inputs on the draft rules issues today. The official said the government hoped to issue letters awarding contracts by 16 March next year.

The draft Rules provide for appointment and conditions of service of the nominated authority, the commissioner of payments and the designated custodian as well as officers and staff to be engaged in these offices and the engagement of experts by the nominated authority.

For allocation through auction and allotment, the central government will issue an order to the nominated authority specifying which coal mines are to be auctioned and which are to be allotted to the government companies. The government will also specify the specified end uses for Schedule II & III coal mines and broad parameter for conduct of auction and allotment.

The nominated authority will prepare a 'Mine Dossier' for each mine containing the particulars of geographical area, coal reserves, mine infrastructure, approvals, permits, etc in relation to such mine for the conduct of e-auction comprising technical and financial parameters.

Graded application fee has been prescribed based on geological reserves.

Eligibility to bid for Schedule II & III coal mines will depend on the status of preparedness of their end use plant - 80 per cent of investment made in the EUP for Schedule II mines and 60 per cent of investment made in the EUP for Schedule III mines.

In the case of allotment to government companies, the progress of development of coal blocks by the applicant in the past, financial and technical capabilities of the applicant, status of preparedness of end use plant, per-capita power availability in the state of the applicant, its current and future requirements etc will be the factors for selecting the allottee.

The nominated authority may also specify the maximum number of mines and/or coal reserves that may be allocated to one or more persons.

 The manner of determination of compensation, priority of disbursal of proceeds arising out of land and mine infrastructure, determination of claims and manner of disbursement.

Prior allottee will have to deposit additional levy with respect to the coal extracted till 24 September 2014 with the central government on or before 31 December 2014 and additional levy with respect to the coal extracted after 24 September 2014 till 31 March 2015 on or before 30 June 2015.

A successful bidder or allottee may utilise coal mined from a particular coal mine in any of its other similar end use plants by giving a prior intimation to the central government in writing and the government may impose such terms and conditions as may be found necessary.

Preparation of a detailed Operation and Management Plan (O&M Plan) by the designated custodian for each mines entrusted to it for approval of the central government.

Authorities created under the ordinance are subject to C&AG audit.

The Supreme Court had in September cancelled the allotment of 214 coal mines to various companies since 1993, saying the process used to assign coal licences by successive governments was "arbitrary and illegal." In October it issued an executive order or Ordinance to facilitate fresh allotment through auction.

Mines will be put up for e-auction for the first time. So far the government has only allowed the e-auction of coal and not mines.

Finance minister Arun Jaitley had said last month that the entire process of re-allocation would be completed within three to four months.