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PSUs' tepid response to 9 coal blocks on offer

Jharkhand State Mineral Development Corporation showed interest in the Sugia Closed Mine under the seventh tranche and, along with NMDC Ltd and Madhya Pradesh State Mining Corporation, it also aimed for the Tokisud North, a Schedule-II mine. All e...

, ET Bureau|
Updated: Nov 05, 2019, 04.55 PM IST
This was the first time that the government offered blocks to state-run non-coal companies for selling 100% output in the open market.
KOLKATA: State-run firms have been lukewarm in their response to the government’s offer of nine blocks, with three entities showing interest in only two of blocks.

This is the government’s first offer of blocks to public sector non-coal companies for selling the entire production in the open market.

Jharkhand State Mineral Development Corporation showed interest in the Sugia Closed Mine in the state. The company, along with NMDC Ltd and Madhya Pradesh State Mining Corporation showed interest in the Tokisud North, a scheduled II mine with a peak rated capacity of 2.32 million tonnes per annum.

“The mines on offer to the public sector units under the 7th tranche have an average peak rated capacity of only 1.6 million tonnes per annum. It would be difficult to realise the benefits of scale economies on such small ticket size mines. This I believe could be one of the reasons behind the lukewarm response from state-owned companies,” said Ritabrata Ghosh associate head corporate sector rating at ICRA.

According to the coal ministry, all eight blocks on offer under the 7th Tranche for allotment are Schedule I blocks with peak rated production capacity between 3 lakh tonnes to 1.5 million tonnes, except for Sayang in Chhattisgarh with a peak rated capacity of 5 million tonnes and an estimated reserve of 150 million tonnes.

However, Sayang is Korba, 75 km from the railway line. It is connected by a 15 km stretch of metalled road and further extended by a fair-weather forest road. “Last mile connectivity for this block seems to be an issue which may lead to additional investment in evacuating coal. This may acted as a deterrent for the block,” a senior executive from a coal company said.

Coal India, which could also bid, refrained from applying since it felt it has enough reserves to meet its targets for years, a company executive said.

Another five blocks offered for captive mining for power generation received applications from six state-owned companies. According to the rules for captive coal block allotment, entities are allowed to sell 25% of their production in the open market.

Mandakini Block in Odisha received applications from Andhra Pradesh Power Generation Corporation, Gujarat State Electricity Corporation, Karnataka Power Corporation, Tamil Nadu Generation & Distribution Corporation, and Telangana State Power Generation Corporation.

Utkal-C, also in Odisha, received applications from Goa Industrial Development Corporation, Gujarat State Electricity Corporation, Karnataka Power Corporation and Tamil Nadu Generation & Distribution Corporation.

Two blocks, Durgapur – II / Taraimar & Durgapur II/ Sariya received bids from Goa Industrial Development Corporation and Karnataka Power Corporation.

There were no takers for Latehar coal block in Jharkhand under the 6th Tranche, while Sitanala Block in Jharkhand under Tranche 8, meant for captive consumption by public sector steel makers received no application.

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