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More arm-wrestling on coal allocation

Source : BUSINESS_STANDARD
Last Updated: Wed, Dec 05, 2012 21:51 hrs
Coal India Q2 net lower than forecast

The power ministry has objected to a contentious provision for allocating blocks to government companies in the new coal mine auction rules worked out by the coal ministry.

Coal reserves earmarked for government companies should be allocated only for captive use in end-use projects and not for commercial mining, the power ministry has said.

Its protest came in response to a draft of the terms and conditions for allocating blocks, floated by the coal ministry recently. "It is observed (in the draft) that area containing coal shall be allocated to government companies for commercial mining only. It may be recalled that there is no mention of commercial mining in Rule 4 (of the coal mines auctioning rules). The blocks need to be allotted only for end-use projects (captive mining)," the power ministry said in a recent letter to its coal counterpart.

The latter had notified the Auction by Competitive Bidding of Coal Mines Rules, 2012, in February. The rules outline guidelines for competitive bidding of blocks but exempt government companies and power projects bid out on rate-based bidding for supply of power from doing so. Blocks will be allocated to government companies based on a reserve price to be set by the central government. The government will choose which to allocate, on certain criteria.

The coal ministry has worked out separate drafts of the terms and conditions - one for mining companies and the other for companies with end-use projects. According to the draft terms for mining companies, coal from such blocks would be supplied to end-use companies through long-term contracts on the lines of linkages. For this, the state government concerned would choose end-use companies on their financial capability and preparedness.

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