Govt starts coal block allocation, outlines norms

New Delhi: The National Democratic Alliance (NDA) government on Wednesday kicked off the process of allocating 36 coal blocks to public sector units (PSUs), outlining norms for the same.

The process, which will be completed by the end of February, marks the beginning of the NDA government’s effort to clean up the coal mess, through a mix of allocations and auctions.

“We are issuing a notification for the allotment of 36 coal blocks,” coal secretary Anil Swarup said in a press conference here adding, “Depending on the requests of the state governments and the PSUs, more blocks will be added.”

The coal ministry plans to allot 101 of 204 blocks, which were cancelled by the Supreme Court in September.

Of these, 42 blocks with a production capacity of 90 million tonnes (mt) are operational and have to allotted by 31 March.

The PSUs which will be allocated the blocks for meeting their needs will also be allowed to bid for blocks that will be offered later through the auction route. Power plants using imported coal are also eligible to participate in the auction, and firm schedules are being put in place to ensure timely production of the fuel.

On 25 August, the Supreme Court had ruled that allocation of all coal blocks from as far back as 1993 and until 2010 were illegal. On 24 September, the court cancelled the allocation of 204 coal blocks, including the 42 operational ones.

One of the key elements of the upcoming allocations will be proximity of the coal blocks to the end-user plants.

“In 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 government had earlier said.

By retaining the option of allowing private miners, it provides an incentive to Coal India Ltd to get its act together and increase stagnant coal production with the enabling provision serving as an or-else threat.

Coal India, the world’s largest coal miner, is struggling to meet rising demand for the fuel. While India’s power generation capacity grew 60% over the last five years, coal production only expanded by around 6%. The country mined 532 mt in 2009-10, 533 mt in 2010-11 and 540 mt in 2011-12.

Production was 557 mt in 2012-13 and 564 mt in 2013-14. The government believes that the blocks, once reallotted, will contribute 350 mt to the fuel basket once mining starts. In the fiscal year to March, India is expected to import close to 180 mt of coal, up from around 165 mt the previous year.

The Narendra Modi government, which is in a race against time to reallot these blocks, is hopeful of active participation by the industry. The government has also allowed firms which have coal linkages to bid for these blocks once they surrender their linkages.

For the 23 blocks offered under Schedule II (operational mines), 87 prospective bidders have purchased 232 applications. Similarly, for the 33 blocks being offered under Schedule III (ready to be mined), 39 companies purchased 82 forms.

“There will be reasonable interest,” Swarup said while adding, “Considering the demand for coal in the country, I don’t foresee any drop in prices.”

He went on to add that if there is a price impact, “CIL will have to look into its price structure”.

Production of coal in India has not kept pace with growing demand for the fuel in a country where the power sector consumes nearly 80% of the domestic output of the mineral.

Behind only China and the US in coal consumption now, India is expected to become the second-largest consumer of the mineral by 2016-17, with demand reaching 900 mt.

Private companies that were allotted many of the 204 blocks that were cancelled by the Supreme Court—and, by extension, those that benefited from the irregular allotment of mines—are eligible to bid for these blocks offered under the auction route, provided they submit the ₹ 295 per tonne levy ordered by the apex court. The companies have deposited ₹ 6,100 crore to become eligible to bid for these blocks.