New Delhi: The e-auction of coal blocks for private companies on Tuesday got the nod from President Pranab Mukherjee who promulgated an ordinance cleared by the Union Cabinet in the backdrop of Supreme Court order quashing 214 coal blocks to companies since 1993.

The move seen as a step towards energy sector reforms will allow private companies to bid for captive use and allot mines directly to state and central public sector undertakings.

“The President has signed the ordinance," said his press secretary Venu Rajamony in New Delhi.

The Cabinet, chaired by Prime Minister Narendra Modi, Monday evening recommended to the President promulgation of ordinance in order to resolve the pending issues particularly the situation arising out of the Supreme Court judgement quashing the allocation of the coal blocks.

Following this Ordinance, state sector requirements including those of the Central and state governments would be met through government dispensation route and coal mines would be allocated to PSUs like NTPC or state electricity boards. Government will put sufficient coal blocks on e-auction for the private sector players who are into the cement, steel and power sectors.

Union finance minister Arun Jaitley had said on Monday evening that the e-auction process will be “transparent" and completed in “three to four months" with proceeds going entirely to the state governments where the mines are located.

The biggest beneficiaries would be the eastern states like Jharkhand, Odisha, West Bengal and Chhattisgarh. States like Madhya Pradesh, Maharashtra and Andhra Pradesh would also benefit.

All companies, except those convicted by courts, will be allowed to participate in the auction and there will be no right of first refusal and all bidders will have to compete in the e-auction through reverse bidding.

The coal blocks, which were earlier allocated through a screening committee mechanism, became a political issue after Comptroller and Auditor General (CAG) alleged arbitrariness and absence of any criteria in the screening process and pegged notional loss to the exchequer at Rs1.86 lakh crore.

The apex court had last month quashed allocation of 214 out of 218 coal blocks alloted to various companies since 1993, terming the method as “fatally flawed".