New Delhi: A group of ministers (GoM) headed by home minister Shivraj Patil has decided that the allocation of coal blocks for the purpose of captive mining will, henceforth, be done through competitive bidding.
If the decision is approved by the Cabinet, it will replace an earlier system where an inter-ministerial screening committee decides on such allocations. The ministry of mines will now move a note to the cabinet for an amendment to the Mines and Minerals (Development and Regulation) Act 1957. The existing process through the screening committee was only an administrative arrangement.
The decision will impact the allocation of 18 coal blocks out of a total 229 identified by the government for captive mining, and also 30 lignite blocks which are yet to be allocated. The GoM’s decision will, however, not affect the fate of 50 coal blocks for which allocations are already under way and the 161 that have already been allocated .
“Over the last three-four years, demand for coal has been rising to such an extent, that in some cases, there were more than 100 applicants for the same coal block. As a result, there have been some cases of criticism about the objectivity of the screening committee. This move is aimed at bringing about greater objectivity and transparency in the allocation process,” said a senior coal ministry official, who did not wish to be identified.
According to the new proposal, once the technical bids have been scrutinized, the blocks would be allotted to the highest bidder against the offer of a lump sum payment. In addition, 5% price preference will be given to the applicants proposing to set up end-use plant in the state where the coal block is located.
Experts believe that competitive bidding for coal blocks could be a step in the right direction, given that the government has been struggling to cope up with the increasingly cumbersome allocation process. “Competitive bidding would not only bring in more revenues for the government but also reduce the arbitrage opportunities for those merchant power producers who would be allocated the coal blocks,” said Shubhranshu Patnaik, an executive director at consultant PricewaterhouseCoopers.
PTI contributed to the story.