The Hindu Business Line : Competitive bidding for coal blocks likely

Policy overhaul
Upfront payment based on value of reserves
Ministry rejects suggestion to offset royalty payment
Plan for bidding only in coal extended to other minerals

New Delhi , Aug 22

The Ministry of Coal is evolving a system of competitive bidding for allocation of coal blocks for captive mining.

The parameters for selecting bids would be similar to those in the New Exploration Licensing Policy (NELP) for oil and gas, according to sources.

Under the NELP, bids are evaluated on the basis of technical capabilities of the bidders, their business plans and financial parameters and also royalty.

For coal mines, however, the royalty is fixed and hence upfront payment would be considered.

The move follows recommendations made by the Investment Commission, which submitted its report in the beginning of July. It had recommended adoption of the NELP model for private sector participation in coal mining by offering good blocks and awards to be given based on qualitative evaluation of financial-technical viability and work programme.

In the proposal under consideration, the bidding process would involve an upfront payment based on the value of the reserves and other statutory mining taxes, the sources said.

The Ministry has, however, not agreed with the commission's recommendations that the fixed royalty payment per tonne extracted, as currently notified, be offset against upfront bid amount.

The Government view is that royalty on minerals is a statutory levy and that it should 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, the sources said. They added that the whole process could take some time. Initially, the plan was to introduce competitive bidding only in coal, but later it was decided to extend it to some other minerals as well.

If the policy were to be restricted to coal mining, it could have been done only by amending the Coal Mines Nationalisation Act but now the Minerals & Mining Development and Regulation Act would also have to be amended.

The Ministry is also in the process of initiating plans so that that mines closed down by Coal India Ltd (CIL) are put to use.

CIL and its subsidiary companies such as Eastern Coalfields Ltd and Central Coalfields Ltd have tied up with State mineral development corporations for opening closed mines in order to recover viable recoverable reserves. Other coal companies too have taken steps for such tie-ups with their respective State authorities.