Captive mines' coal to be sold in open market

The government on Tuesday allowed sale of 25 per cent of coal production from captive mines in the open market, a move aimed at increasing competitiveness and making future auction of blocks attractive. The decision was taken during the meeting of the Cabinet Committee on Economic Affairs under the chairmanship of Prime Minister Narendra Modi, an official release said.

The allottee of a coal mine for specified end use or own consumption was not permitted to sell coal in open market earlier. "The Cabinet Committee on Economic Affairs...has approved the methodology for allowing the allocatee of coal mines for specified end use or own consumption to sell 25 per cent of actual production on ROM (Run-of-mine) basis in open market with payment of additional premium on such sale under the Coal Mines (Special Provisions) Act, 2015 and the Mines and Minerals (Development and Regulation) Act, 1957," it said.

This methodology attempts to address the issue of lack of response from bidders during the auction/allotment of coal blocks. "The methodology will give certain flexibility to allocattee in cases of change in economic situation, business cycle, end use plant requirement etc. It is expected to make the on-going and future tranches of auction and allotment attractive and commercially viable and may increase the competition in the auction process," it said.

The move is also expected to increase competitiveness and higher investment would create direct and indirect employment in coal bearing areas especially in the mining sector and will have an impact on economic development of these regions. The new methodology provides that, in case of coal mines earmarked for specified end uses or own consumption, the allocatees are mandated to utilise a minimum of 75 per cent of its actual production (ROM basis) in specified end use plants and are allowed to sell up to 25 per cent in open market, it said.

In case of auctions, the successful bidder will be required to pay an additional premium of 15 per cent of its final bid price on per tonne basis, for the actual quantity of coal sold in open market. The additional premium will be over and above the final bid price.

In case of allotments, the successful allotee will be required to pay an additional reserve price of 15 per cent of the reserve price, for the actual quantity of coal sold in open market. The additional reserve price will be over and above the reserve price.

"As per existing conditions, any coal which is extracted in excess of the requirement of the bidder in terms of conditions of tender document is required to be supplied to CIL at the CIL Notified Price less 15 percent of such CIL Notified Price...Also such sale should not exceed 50% of the annual coal production from the mine," it said. The government in 2017 annulled the fifth round of coal mine auction due to poor response from bidders.

In December 2015, the government annulled the fourth round of coal mine auctions planned for January 2016 on account of tepid response from bidders in sectors such as steel besides depressed commodity prices and adverse market conditions.

(With inputs from agencies.)