Move to introduce bidding for allocation of coal blocks

New Delhi, Dec 6 (UNI) The Government is contemplating introduction of competitive bidding system for allocation of coal mining blocks for captive use as the selection process by amending the Mines and Minerals (Developmentand Regulation) Act, 1957, the Lok Sabha was informed today.

Minister of State for Coal Dasari Narayan Rao said in a written reply that the Investment Commission had recommended adoption of NELP model for private sector participation in coal mining by offering good quality coal blocks for bids. As against the recommendation of the Commission, Ministry of Coal had taken the stand that parameters of allocation of blocks through contemplated competitive bidding would not be too dissimilar from that of NELP.

Dr Rao further said that the other recommendations of the Commission and views of the Government are to carve out specified viable mining blocks from Coal India Ltd for captive exploitation.

Alternatively, encourage the subsidiaries of CIL to induct strategic partners from leading mining companies, partners could develop existing blocks on production share basis. An exercise was carried out and 48 blocks with geological reserves of about 9.22 billion tones were de-reserved from the list of blocks earmarked for Coal India Ltd. for allocation to captive approved end users. Coal companies are also exploring innovative approaches and practices such as outsourcing of mining equipments and services from reputed mining firms on risk-and-gain sharing basis, development of dedicated mines for bigger clients etc. The commission also recommended to offer all mines that have been closed by CIL to the private sector, in case there are viable recoverable reserves. CIL and its subsidiary companies are exploring the possibility of working out such arrangements. Fixed royalty payment per tonne extracted, as currently notified, to be offset against upfront bid amount, it recommended. In the proposal under consideration, it is not contemplated to offset royalty dues against the bid amount.

He said royalty is a statutory levy, and that could continue to accrue to the State Governments, based on the quantum of coal extracted. This is a major and stable source of income for the State Governments and this need not be subjected to any uncertainties. It recommended to institute a "use or lose" policy for all blocks, to prevent hoarding and ensure best competitive use. Condition to the effect are stipulated while allocating captive coal blocks.

Specified mile stones are laid down for completion of various activities relating to development of coal blocks as well as the associated end-use projects. If no progress is made by the captive coal blocks developers the allocation of coal blocks as well as mining lease are liable to be cancelled. A system of Bank Guarantee has also been subsequently introduced. It recommended to permit 50 per cent FDI under the automatic route. Government has already approved 100 per cent FDI in captive mining of Coal for all the approved end-uses. It also wanted to permit merchant sale of coal by coal mines. A bill stands introduced to amend the Coal Mines (Nationalisation) Act to provide for commercial mining by private sector.

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