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Coal auction rules: 4% revenue share, affiliate companies not allowed

The companies can sell the coal blocks after they achieve their peak capacity. Also, the successful bidder shall produce coal not below 50% of the scheduled production as per approved mine plan in a year and not less than 70% of the scheduled production in any block for three years.

, ET Bureau|
Last Updated: Jan 15, 2020, 09.00 AM IST
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Government has kept commercial coal auctions open to all companies incorporated in India and has set a minimum 4% revenue share from each mine as a bid parameter.
NEW DELHI: The government has kept commercial coal auctions open to all companies incorporated in India and has set a minimum 4% revenue share from each mine as a bid parameter.

The coal ministry on Wednesday kickstarted the auctions by releasing a list of 84 mines with about 22,360 million tonnes (MT) reserves identified for commercial mining, including about 10 mines with reserves upwards of 500 MT which are likely to generate interest from Indian and global major firms like Adani Group, JSW Energy, Peabody, BHP Billiton and Rio Tinto.

The blocks will be offered in tranches, said a discussion paper. The ministry will not start stakeholder consultations and targets first tranche of the auctions before fiscal end.

On January 10, ET had reported that India’s upcoming coal auctions may have no financial or technical qualification criteria for bidders easing entry for interested firms, but will impose penalties strict enough to prevent companies from squatting on mines. ET had also reported that the government will offer incentives for quick production.

The discussion paper on key terms and conditions floated by the coal ministry have kept the revenue-share based auctions open for all firms. Bids by affiliate companies will be rejected. The selected companies have to submit 0.5% of the value of estimated resources of the coal mine in four tranches based on a National Coal Index — weighted combination of monthly prices of coal in various channels of transaction.

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Selected firms will have to pay performance guarantee of 50% each of royalty and revenue share payable to the government in one year on peak capacity of the mine. They will pay the revenue share from mining to the government on a monthly basis. For a big block with up to 40 MTPA peak capacity, a selected bidder will shell out a performance guarantee of about Rs 400 crore.

The bank guarantees by bidders for participating in auctions is about 20% of the upfront cost.

“The bidders would be required to bid for a percentage share of revenue payable to the government. The floor price shall be 4% of the revenue share. Bids would be accepted in multiples of 1% of the revenue share till the percentage of revenue share is up to 10% and thereafter bids would be accepted in multiples of 0.50% of the revenue share,” the paper said.

No restriction has been imposed on the sale and utilisation of coal produced from the coal mines. The companies can sell the coal blocks after they achieve their peak capacity. Also, the successful bidder shall produce coal not below 50% of the scheduled production as per approved mine plan in a year and not less than 70% of the scheduled production in any block for three years.

Companies can mine coal bed methane gas in line with the existing policies for utilisation and pricing of natural gas.

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