When the Ordinance to allow e-auction of the coal blocks to the actual end-users is passed, it would bring some stability in the market
At a press conference, Finance Minister, Arun Jaitley (after the approval in the Cabinet meeting) announced that the government had decided to promulgate an Ordinance so as to allow e-auction of the coal blocks to the actual end-users.
This process, which is to be done, on a sector-wise basis, is expected to be completed in the next 3 or 4 months. Organisations like NTPC and State Electricity Boards (SEBs) will now be allotted their own coalmines for "captive use". While NTPC and some others may have some idea and experience on actual mining, most of them will now look forward to sub-contracting this mining operation to labour contractors. Whether this will be successful or not remains to be seen.
It was reported in the press that a Suitable Committee will be formed that would first decide the auction floor price. It is expected that this committee will be formed soon and its members identified; hopefully, it will contain experts in the field as also qualified technical experts. Also, out of the hundreds of mines that are available, those that have "reached" various stages of clearances, environmental and otherwise, need to be identified separately and clearly, so that bidders know exactly where they stand.
The second step would be to identify the quantum of compensation that will have to be paid by the successful bidder to the current allottee. There would be no problem that can be expected if the present allottee himself is the successful e-auction bidder, as nothing prevents them to participate, as stated in the press meet, by FM Arun Jaitley and also clarified by Piyush Goyal.
Perhaps, this is most appropriate time for the Committee to ask all the existing allottees to identify the equipment, if any, that are already in-situ and give a lump sum value "cost" involved in the development of the mines, as most of them have to "return" these mines on or before 31st March 2015. At the same time, all related documents, details of the status of land-lease, status of the relief and rehabilitation work already undertaken by the existing allottees have to be submitted to the Committee, so that these form relevant part of the e-auction exercise! For, it must be remembered that many of them are already producing coal and six of them are expected to go into production any time now to before March 2015.
After the Supreme Court decision was announced, there was a lot of talk and debate whether the existing "owners" of these illegally allotted mines would have the first right of refusal. It has now been clarified this will not be the case, as every bidder will be treated at par, and that, the existing allottee, who will have to "return" the coal block is also entitled to make the bid.
Since e-auction is proposed to be done sector-wise, like power, cement and steel, the bidders will have to put in their requirements and adequate number of mines will be put up for this purpose by the Committee. As mentioned before, even those companies who are under investigation for irregularities in the earlier coal block allocation are also free to bid but the successful bidder will be one who has needs for captive use.
In the case of Coal India, which has about 200 coal mines where no work has taken place, for years now, at least for the time being, denationalisation has been put in the back burner! It will continue to remain as the apex body but by this Ordinance will face an indirect competition from organisation like NTPC and State Electricity Boards, who will now have their own "captive coal mines". In a way, this will be a sigh of relief, in a few years from now, when they start mining their own coal, and to which extent, Coal India will have "excess" coal to supply!
When this Ordinance is passed, it would bring some stability in the market. But what is needed is for the MoEF and the state governments, who have a long process of giving various clearances before mining operations can commence, to ensure that all the local and related clearances are handled expeditiously. Both must work on "expediting" organisations instead of being stumbling blocks as in the past.
One other provision in the Ordinance is expected to cover participation by Joint Venture partners, hinted, most likely to be foreign investors. This is an encouraging sign and many bidders may take this opportunity to bring in their oversea partners with advanced technology and machinery to develop underground mines more efficiently than hitherto.
It may be worthwhile considering if provision can be made about extraction of coal bed methane as a part of the whole exercise, if practical.
Environment must be protected but delays should be averted in the whole process.
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)
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