Mines ministry opposes auction of coal blocks

Mines ministry opposes auction of coal blocks
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First Published: Mon, Jul 30 2007. 05 08 PM IST
Updated: Mon, Jul 30 2007. 05 08 PM IST
New Delhi: In sharp contrast to the Coal Ministry’s views on the auction of coal blocks to various sectors, the Mines Ministry has opposed the move saying power utilities will lose their priority status and electricity tariffs will rise substantially.
“While the steel and cement sectors make products whose prices are market-driven, power operates in a regulated environment and an increase in the cost of coal may get passed on to the consumers in the form of higher price of electricity,” the Mines Ministry said in a draft note prepared for the Prime Minister’s Office on the national mineral policy.
Power utilities have also opposed the competitive bidding process, approved by a Group of Ministers headed by Home Minister Shivraj Patil, arguing that the current priority accorded to the power sector, especially state-run utilities, would cease to exist in the new regime.
Since power companies cannot pay a higher price, which steel and cement sectors can, they may not be able to compete with the latter. This would not be desirable considering the higher priority of power companies compared to other sectors, the note said.
The Coal Ministry will, however, soon start allocating blocks through competitive bidding instead of getting an Inter-Ministerial Screening Committee to earmark them. The move is aimed at making the process more transparent.
“Since the Group of Ministers has cleared competitive bidding-based allocation of coal blocks, we will start allocating the blocks soon,” a Coal Ministry official told PTI.
With the demand for coal rising sharply, the number of applicants from the public and private sectors too has risen substantially. This has made the process of allocation difficult and subject to criticism on transparency and objectivity, the official said.
“In some cases there were more than 100 applicants for the same blocks,” he added.
The Coal Ministry had earlier mooted amending the Coal Mines Nationalisation Act in order to introduce competitive bidding. However, it was subsequently decided to amend the Mines and Minerals (Development and Regulation) Act, 1957, so as to make competitive bidding applicable to all minerals, including coal.
The Mines Ministry, however, preferred the mechanism of allocation to be made applicable to coal only and the same could be considered for other minerals after examination of the recommendations of the Hoda Committee on mining sector.
“The Mines Ministry will soon move a proposal to the Cabinet before the Bill is introduced in the Parliament for allocating blocks through competitive bidding,” the official said.
Out of the 229 coal blocks identified so far, 160 blocks have been allotted to private and public sector companies and another 50 are being processed for allocation.
According to the new proposed regime, after the technical bids are scrutinised, the blocks would be allotted to the highest bidder against the offer of a lump sum payment. Five per cent price preference will be given to the applicants proposing to set up end-use plant in the state where the coal block is located.
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First Published: Mon, Jul 30 2007. 05 08 PM IST