The Ministry of Coal is of the opinion that the right to reject bids of the coal mine auctions rests with the government and guidelines on the same cannot be issued as it goes against its economic interest.

This is an opinion that has also been vetted and agreed upon by the Attorney General of India, according to a senior Coal Ministry official.

The Comptroller and Auditor General, in its audit report “e-Auction of Coal Mines” pointed to the three winning bids being rejected by the Coal Ministry after the first tranche of electronic auctions for coal mines held last year. The government auditor suggested that prior guidelines for evaluation of final bid prices should be in place to reduce litigation.

However, the government auditor also, in its tenders, retains the right for rejection, the Coal Ministry official pointed out to the July 27 tender issued by CAG.

“After getting the draft report we sought the view of the Attorney General of India and he agreed that issuing such guidelines would go against the economic interest of the government,” a senior Coal Ministry official told BusinessLine .

Three bids rejected

After the first tranche of the coal mine e-auctions, the Coal Ministry re-examined eight bids and ultimately rejected three of them. Of these two were from Jindal Power Ltd for the Gare Palma IV/2&3 and Tara blocks and one from Balco for the Gare Palma IV/1 block on March 21, 2015.

Five more blocks, which were being re-examined were won by Hindalco Industries, Jaypee Cement, Usha Martin, BS Ispat and Trimula Industries.

Gare Palma IV/2&3 was a block reserved for the power sector and was won by Jindal Power Ltd for only ₹108 a tonne, despite having 155.49 million tonne extractable reserves.

In the non-power category, the highest bid was for ₹3,502 a tonne for a block won by Hindalco for Gare Palma IV/5. However, the winning bid for Gare Palma IV/1 by Balco was only ₹1,585 a tonne.

Immediately after the rejection of the bids, Jindal Steel and Power Ltd, the parent company of Jindal Power Ltd, approached the Delhi High Court.

The Coal Ministry had maintained at the time that it rejected the bids as it did not feel they represented the fair value of the mines.

There were also suspicion of cartelisation which made the Coal Ministry reject the bids.