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Ambiguous phrasing of coal rules can be misread: Experts

Ambiguous drafting continues to dog the NDA's coalblock auction plans. After the Coal Bill, it is the turn of the Coal Mines (Special Provisions) Rules, 2014. Rules say the central government can allot a coalblock where mining has already started to any company recommended by the ministry of power which "henceforth may be awarded a power project based on competitive bids for tariff".

The phrasing, say industry experts, creates an outcome where companies become eligible for an allotment even if they just intend to bid for a power project.

Says Dipesh Dipu, an energy expert who is currently teaching at Hyderabad's Administrative Staff College of India: "This is the same discretionary route. Hopefully, the Rajya Sabha will discuss the matter and the rules and regulations will be clarified further."

As in the case of the Coal Bill, this is an instance of the government trying to address a concern, but its solution creating a fresh loophole.

The Coal Bill, introduced in the Parliament last week, had said the government can allot blocks not only to government companies but also to private ones that have "been awarded a power project on the basis of competitive bids for tariff (including Ultra Mega Power Projects)."

According to coal ministry officials, this clause had been inserted to facilitate tariff-based bidding for integrated projects like UMPPs (where the coalblock is bundled with the power supply bid). However, critics felt it would also result in an outcome where politically-connected companies, confident of getting cheap coal through a block allocation, would bid much lower than others for power projects.

Further, in a bid to extend the principle of issuing coalblocks through tariff-based bidding beyond UMPPs, the ministry defined eligibility as "including UMPPs". This resulted in a parallel interpretation where any company with a PPA became eligible for such an allotment.

Something similar is happening with the Coal Rules. The government wants to ensure blocks given out through the tariff-based approach go only to new projects --partly to boost power generation, partly to ensure there is no litigation where companies want their PPAs renegotiated.'Henceforth', in clause 12 of the Rules, says the Coal Ministry official, is to prevent that. It refers to bids that will take place in the future.

However, as industry experts say, the clause can also be read in a manner which suggests that companies planning to bid for a power project are also eligible for an allotment. Says Vinayak Chatterjee, CMD of infrastructure consultancy Feedback Infra: "This is a drafting issue.

The intent is right — to create many more projects like UMPPs."

Source: The Economic Times