Tepid response for the coal mine auction rounds

Poor market sentiment and expectations of commercial mining have led to a tepid response for the blocks on offer during the current round of coal auctions. These mines are being auctioned under the 8, 9 and 10 round of bids simultaneously being conducted by the Ministry of Coal.

“In all 45 bids were received for the blocks on offer. An adequate number of bids have been received for just 6 out of the 27 blocks on offer in the auctions. Another six blocks have received interest for allocation to State or Central government entities. In total, 12 of the 42 blocks envisaged to be auctioned or allocated in this round are now in the fray,” a top Coal Ministry official told BusinessLine.

In August this year, the Ministry of Coal had started the process of auctioning 27 coal mines and allocating 15 mines to developers. This process was re-initiated after previous attempts elicited an inadequate response from bidders given market conditions. The allocation of blocks will be restricted to Central and State public sector undertakings.

“This response could be because of expectations from commercial coal mining and also because of market sentiments. Some smaller bidders also decided to stay away because of the distance between the blocks on offer and the end-use plants citing higher transport costs. They would prefer to buy coal from Coal India or its subsidiaries to meet their requirements,” he said.

“These blocks that did not get a response will be put up for auction or allocation in the next rounds,” the official added.

In September this year, BusinessLine reported that potential bidders for the next round of coal auctions had expressed concern over the lower number of coal mines being put up for auction in the Eastern part of the country.

At a meeting called by the Coal Ministry of the stakeholders, prospective bidders had pointed out that the end-use industries (coal consumers) are in the East, but a majority of the blocks on offer are in the Western part, especially Maharashtra.

“This is a deterrent and may hamper the viability of the auctions as the coal transport costs will go up significantly for steel, power and other such large industry players that win these far away blocks,” a participant in the meeting called by the Ministry of Coal had said.