Options narrow for the Coal Ministry

Coal Minister Piyush Goyal and his team have six months to come up with a mechanism to ensure smooth fuel supplies after March 2015. The Ministry will now have to make a fresh start, and the most obvious option available now is the open bidding mechanism.

“If open bidding is the best option available we will work on it,” Goyal had told BusinessLine earlier. Goyal, who is also the Power Minister, has been maintaining that ‘long-term’ solutions need to be found.

“The Government is ready with a plan to expeditiously and transparently auction coal blocks, subject to the outcome of the Supreme Court verdict,” he had stated.

On September 15, the Ministry had responded to the Prime Minister’s Office on the contingency plan it had formulated to deal with the implications of the Supreme Court judgement on coal block allocation. While stating that the final plan will be possible only after the verdict, the immediate way out was either acquiring unworked coal producing blocks or taking over the assets and handing them to a Government-appointed custodian.

This custodian could be Coal India. Open bidding was also recommended by the PC Parakh panel in 2004.

The open bidding mechanism is not a model that the Government will be adopting for the first time for coal block allocations. It has been done for ultra mega power projects (UMPPs). Industry observers say that what the Central Government will need to clarify is who will play a larger role in signing of the contracts — the State or the Centre.

On the acquisition of land bearing coal blocks, the Ministry said the Coal Bearing Areas (Acquisition and Development) Act provides for acquisition of unworked land or area that is likely to contain coal deposits. The advantage of using this option is that a separate mining lease is not required.

The other option available before the Government is to enact fresh legislation. A new Bill on the lines of the Coal Mines (Taking Over of Management) Act could be brought with provisions to handle the current situation.

Any decision has to stand the test of time, and who would know it better than Coal Ministry. To increase domestic production, private participation is required, those associated with the industry added.