Policy

Nod for auction methodology for commercial coal mining

Twesh Mishra New Delhi | Updated on May 20, 2020 Published on May 20, 2020

Price of commercially mined coal to be benchmarked to National Coal Index

The Cabinet Committee on Economic Affairs has approved a mechanism that will pave the way for commercial coal and lignite mine auctions in the country.

An official statement said these mines will be auctioned based on the revenue share they offer to the government.

 

Until now, coal and lignite mines were auctioned to those who had end use for these resources, such as a steel or power plant. The commercial coal mines, on the other hand, will be allowed to sell coal in the open market.

No eligibility conditions

The introduction of commercial coal mining was announced by Finance Minister Nirmala Sitharaman as a reform measure in the Aatmanirbhar Bharat package. She said nearly 50 coal mines will be offered this immediately and that there will be no eligibility conditions; only upfront payment with a ceiling.

To plug under-reporting of revenue by bid winners, and lowering the government’s take, the price of coal mined will be estimated based on a National Coal Index (NCI).

“The revenue share will be calculated on the NCI. It will reflect movement of prices of coal in domestic coal market and will be the weighted combination of monthly prices of coal in various channels like notified prices, e-auction prices and import prices. The NCI will be reported twice every month,” a Coal Ministry official told BusinessLine.

The firms that win bids for coal mines will have to make monthly payments based on the percentage of revenue share (final bid), quantity of coal on which the statutory royalty is payable during the month and notional price (based on NCI) or actual price of coal realised through sales, whichever is higher.

“The bidders would be required to bid for a percentage share of revenue payable to the government.

“The floor price shall be 4 per cent of the revenue share. Bids would be accepted in multiples of 0.5 per cent of the revenue share till the percentage of revenue share is up to 10 per cent and, thereafter, in multiples of 0.25 per cent of the revenue share. There shall be no restriction on the sale or utilisation of coal from the coal mine,” an official statement said.

They would also be allowed to exploit coal bed methane (CBM) from the coal mine won in the auction.

“CBM exploitation shall be on the same revenue share model as applicable for coal. But the allottee will have to get the approval of the Directorate-General of Hydrocarbons and the respective State governments before starting work on CBM,” the Coal Ministry official said.

Published on May 20, 2020

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