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Potential coal mine buyers seek lower auction thresholds

The Centre's discussion paper on coal block auctions suggests bidders offer to share at least 4% of revenue from a block. For more than four bidders, up to three parties will be barred from further participation, while the highest initial offer will be the floor for the next stage, in which bids will be accepted in multiples of 1% until 10%, and thereafter in multiples of 0.50%.

, ET Bureau|
Last Updated: Feb 25, 2020, 01.31 PM IST
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Kolkata: Potential buyers of coal mines have urged the Centre to set lower auction thresholds to attract viable bids and offer assets that already have green clearances to help speed up mine development and extraction of the solid fuel.

The Centre's discussion paper on coal block auctions suggests bidders offer to share at least 4% of revenue from a block. For more than four bidders, up to three parties will be barred from further participation, while the highest initial offer will be the floor for the next stage, in which bids will be accepted in multiples of 1% until 10%, and thereafter in multiples of 0.50%.

Twenty-six potential Indian bidders and one foreign equipment manufacturer attended stakeholder meetings organised by the Centre last month. They sought a lower floor price and incremental slabs.

"The auction process has an inbuilt mechanism to disincentivize low initial bids. This may bring competitiveness into the process early on, but the subsequent auction method runs the risk of very high bids, as happened during the first round," Partha Bhattacharyya, former Coal India chairman, told ET on the sidelines of a recent meeting held in Kolkata. A recent acquisition of a coal block in March 2019 worked out to $5.21per tonne of reserve, when the price of coal was more than $150 per tonne, indicating a revenue share of 3.4%. In this context, the floor level of revenue should be 3%, to prevent high uneconomical bids and encourage quick development of blocks, Bhattacharyya said.

Potential bidders said output can begin in two-three years instead of more than five if blocks already have various clearances.

For mines that were producing the fuel before the Supreme Court cancelled their licences, stakeholders suggested clearances be transferred to the successful bidders so that operations would resume immediately.
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