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End users of coal have once again shied away from coal mine auctions, turning the eighth, ninth and tenth rounds of bids into a damp squib.
At a meeting held in September this year, potential bidders expressed concern over the low number of mines being put up for auction in the eastern part of the country. They pointed out that while the end-use industries (coal consumers) were in the East, a majority of the blocks on offer were in the West, specifically Maharashtra.
The majority of mines offered during the eighth tranche were for the unregulated sector (any industry other than the power sector). In all, nine mines in Maharashtra, four in Chhattisgarh, two in Madhya Pradesh, three in Jharkhand, and two in West Bengal were up for grabs in the round.
In the ninth tranche, five coking coal mines in Jharkhand and one in Madhya Pradesh were earmarked for the steel sector. In the tenth tranche, there was one on offer in Odisha, which was for the unregulated sector.
“It’s not viable as transport costs go up significantly for steel, power and other large industry players that win these faraway blocks,” a participant in the auctions told BusinessLine .
Of the 27 mines being auctioned, 21 are earmarked for the non-regulated sectorand six coking coal mines are for the iron and steel sector.
The allotment for public sector undertaking companies includes five mines for the power sector, nine for the sale of coal, and one for iron and steel.
Bidders are also hopeful that they will soon have the option of commercial coal mining in the country, officials from the Coal Ministry said.
Commercial coal mining
Last month, the Minister for Coal, Mines and Parliamentary Affairs, Prahlad Joshi, said the Centre aims to hold the first round of commercial coal mining auctions by December-end.
Joshi said, “Foreign direct investment has been approved in the coal mining sector. This will lead to higher investments and technology. It will also address the shortcomings in the coal mining sector. By December or so, we are planning to offer blocks for 100 per cent commercial coal mining.”
The Centre allowed private companies to mine coal for commercial use in February 2018. But, so far, all the mines that have been auctioned have had a pre-specified end-use for the coal to be mined. Following the inadequate response, the Centre decided to offer an added incentive in subsequent bid rounds – the winners were allowed to sell up to 25 per cent of the coal produced in the open market. In the mines auctioned till now, it is still mandatory to use at least 75 per cent of the production for the specified end-use.
Coal Ministry officials say that bidders may have also stayed away on account of poor market sentiments. “Some smaller bidders stayed away citing the distance between the blocks on offer and the end-use plantss. They would prefer to buy coal from Coal India or its subsidiaries, to meet their requirements,” a Coal Ministry official said.
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