Centre relaxes timelines, sweetens deal in coal auctions

Twesh Mishra New Delhi | Updated on August 07, 2019

Allows more time to develop mines; greenlights partial open-market sales

The Coal Ministry has relaxed timelines and ironed out policy issues hoping to get a better response to the latest round of coal mine auctions.

“There are 22 old mines and 20 new mines that are being offered with most of them being Scheduled III coal mines. This means that production from most of these mines will begin four to five years from now,” said Ashish Upadhyay, Joint Secretary in the Ministry of Coal and the Nominated Authority for coal auctions and allocations.

The Centre will be auctioning 27 coal mines and allocating 15 mines to developers. The old mines are those that have been put up for auction in earlier rounds. It also includes mines like Tokisud North that were bid out and then relinquished by the winner.

“To reduce regulatory overlap, the mine winners will have to self declare the total coal production from a mine, which will be subject to verification by state authorities. The mine efficiency parameters have also been relaxed for auctioned mines and now instead of 48 months, the winner will have 66 months to develop a mine. There will also be an additional grace period of 15 months. No penalty will be imposed if the delay is within the stipulated time frame,” Upadhyay told BusinessLine.

“The last successful auction of coal mines in the country took place in 2015. We have ironed out the issues faced by bidders during the previous round. The existing Environment and Forest clearances (for Schedule II or operational and ready to operate mines) will be automatically transferred to the winners of coal mines. “As an added incentive, the winners can sell up to 25 per cent of the total coal produced in the mine in the open market. It is mandatory to use at least 75 per cent of the total coal production for the specified end-use,” he said.

Explaining how coal will be sold in the open market from these auctioned mines, Upadhyay said, “When selling coal in the open market from end-use linked mines, the mine operator will have to post a notice at least 15 days in advance on the website of the State government, Company and the Coal Controller’s Organization (CCO).


“In the event of more than 25 per cent coal being sold in the open market in a quarter, the option of a quarterly reconciliation is available. If at the end of the year, it is established that more than 25 per cent coal has been sold in the open market from an end-use linked mine, a penalty will be levied on the mine developer. The penalty will be calculated based on the highest Coal India auction price for that grade of coal (that year) or on the price at which the coal has been sold by the mine operator, whichever is higher,” he said.

“If the mine operator defaults for three consecutive years or five times over the lifetime of the mine, then the option to sell coal in the open market will be withdrawn,” he added.

Published on August 07, 2019

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