Government comes out with rules for coal mine under auction

Government on Wednesday came out with draft rules coal mine auction which clarifies that there would be no restrictions on the sale of coal mined and said it was starting the process of auctioning this year itself.

The draft rules said “there shall be no restriction on the sale or utilisation of coal from the coal mine. The Successful Bidder shall be free to sell coal in any manner …. (and ) utilise coal for captive consumption and export.”

While a cabinet decision taken earlier this month amending the Mineral and Mining Development Act this month made it clear that end-use restrictions would be removed, the presence of a state-regulated price cap for the sector had left coal miners confused on whether the market was truly being liberalized.

The rules state the bidders who can be any company registered in India including those with 100 per cent foreign direct investment as well as state-run companies, would have to bid for a percentage share of revenue payable to the Government, with a floor price shall be 4 per cent of the revenue share. Some 74 mines are to be put for auction.

The upfront amount payable to the Government will be 0.5% of the value of estimated resources of the coal mine. Currently, miners have to pay 10 per cent of the estimated value of a mine upfront. “This huge pay-out, as well as restrictive clauses like price caps and end-use restrictions, had meant Indian mines did not interest any foreign bidder till now,” said coal ministry top officials.

Among mines being put up for auction in the first tranche are Anesttipali in Telengana, Chandipada, Mahanadi and, Kuraloi North in Odisha< Ashok Karkatta in Jharkhand and Jaganathpur in West Bengal. Officials pointed out that as a result a round of auctions held in October were not very successful, with many mines left unbidden for. The Government said in statement: “the Ministry of Coal is initiating the process for auction of coal mines for sale of coal. Expected to be held in multiple tranches, the first tranche is proposed to be launched in the current financial year.”

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