As round one of the auctions for coal blocks comes to a close on March 9, the high bidding amounts being quoted has made the government conclude that the floor price is ‘virtually irrelevant’.
Floor price is the rate below which the bidders cannot make an offer.
For the blocks reserved for the non-power (such as steel, cement, and aluminium) sectors, the Centre had decided that the floor price will be ₹150/tonne, while for those in power, there is a ceiling price based on Coal India notified rates, depending on the fuel grade. These rates vary from block to block. Most of the blocks in the non-power category (both producing and ready-to-produce) have been sold in the range of ₹727/tonne to above ₹2,000/tonne. The maximum that has been hit till March 8 is ₹3,502/tonne.
The total number of blocks auctioned till March 8 are 28 (both producing and ready-to-produce categories). The blocks allocated for non-power sector were 18.
On March 9, two more blocks will go under the hammer, one each for the power and non-power sectors.
Asked if the high bidding price could mean a revisit of the floor price, an official told BusinessLine that “revisiting the floor price is most unlikely, as this is based on net present value of the mine. It has nothing to do with the bids.”
An industry official said there are other factors that bidders look at when making a price offer, including international landed price of coal, consistency of supply, as well as fluctuations in international and domestic prices.
3 bids under reviewOn the three bids that are being re-examined by the Nominated Authority for going a price much lower than expected, a Coal Ministry official said the “report is being expected in a day or so”.
The Centre will then take a call on the fate of the winners. The three winners whose bids are being re-examined are Naveen Jindal’s Jindal Power Ltd (Gare Palma IV/2&3), Anil Agarwal’s BALCO (Gare Palma IV/1), and BS Ispat’s (Marki Mangli III). While Jindal’s is for the power sector, the other two are in the non-power category.
“If some tampering is found in the bid process, the blocks may be re-auctioned,” another official said. Though the auctions for these blocks were completed, the final agreements are yet to be signed.
Gare Palma IV/2&3, which was won by Jindal Power Ltd, despite having 155.49 million tonne extractable reserves, went at much cheaper rates than others at ₹108/tonne. This block was earlier also owned by Jindal.
Currently, the Centre is considering these blocks as sold till the final verdict is out, the official said.