Coal news and updates

Flexible coal use norms on course

The government will relax the rules on the use of coal from captive mines as it prepares to auction 22 blocks by December.

On the agenda is a mechanism allowing firms to divert coal from captive mines used in a particular steel or power unit to another owned by the same group.

At present, this is not allowed under rules framed during the tightly controlled era of the 1970s over fears of coal being sold in the black market. However, with coal being available in the open market, such rules have become irrelevant.

“This means SAIL, for instance, can carry coal meant for Bokaro to Salem (Tamil Nadu) if it feels the need, or the Tatas can use the coal meant for the Maithon power plant (Jharkhand) in Jojobera (Jharkhand),” officials said.

Steel, power and cement companies are allowed to run mines to feed dedicated plants. Companies can mine only that much which is required and not to the optimum capacity, leading to the wastage of resources.

With a little extra capital expenditure, miners can increase output from a captive mine by 30-100 per cent.
Another proposal is to sell the excess coal in the market, either directly through an auction or through Coal India’s e-auctions.

The initial plan was to turn the PSU miner into a coal bank where firms will send their excess coal, which if they did not buy back can be sold elsewhere.

With Coal India objecting to the plan, it was proposed that the state-run miner would earn a fee from whatever private coal is put up for sale through its e-auction platform.

In August, the coal ministry circulated a note on the auction of the 22 blocks with 2.7 billion tonnes of reserves, where it suggested an alternative pricing strategy. Crisil Infrastructure had advised the government on the pricing.

Besides the methodology to fix the reserve price, Crisil was asked to prepare a model tender document and the draft agreement with the successful bidders.

The profit-share method used for gas has been dropped as oil and gas exploration firms have often been accused of raising costs to show lower profit.

Another 32 blocks would be put up for auction depending on the response to the first bidding, said officials.

Bid conditions

The government is also likely to bring in a clause asking participants to pay 10 per cent of the value of the mine reserves upfront in a bid to eliminate non-serious bidders.

The mine value will be calculated at a discount to the five-year average global price of coal.

Bidders will also have to prove their minimum net worth and experience in mining to be able to qualify for the auctions. Foreign investors can participate as part of a bidding consortium.

There will also be a minimum work programme to ensure that the winners do not keep the mines idle. Miners will be given a timeline within which they have to achieve a certain level of work.

The Mines and Minerals (Development and Regulation) Act was amended in September 2010 to allow the auction of coal blocks.

Around 54 blocks have been identified with 18 billion tonnes of reserves for the auction. Rules for coal block auctions through competitive bidding were notified earlier this year.

Meet on blocks

The inter-ministerial group (IMG) on coal blocks is likely to meet this week to decide the fate of around 30 coal blocks, according to a PTI report.

Allottees of these 30 blocks were earlier issued show cause notices for delaying production from the mines.

“The IMG is likely to meet this week. During the meeting, we will examine the replies of allottees of around 30 coal blocks which were issued show-cause notices,” a source close to the development said.


Source: The Telegraph