The Central government will ensure the auction of coal blocks doesn't lead to a hike in power tariffs, prevents bidders from grabbing too many mines and allows bids by companies such as Tata Power and the Adani Group, whose plants use imported fuel, Coal Secretary Anil Swarup said.
"The bottom line is that tariffs should not rise. It is not a revenue-maximising approach, it is essential to keep a lid on tariff," Swarup said, while announcing draft rules for the ordinance on coal block auctions. For this, the government will have a separate set of rules for the auction of mines to power, steel and cement companies as the entire burden of tariff hike cannot be passed on to consumers.
The proposed rules also have eligibility criteria that will give comfort to firms with operating plants attached to mines that have been cancelled. The rules say eligibility "shall be dependent on the status of preparedness of their end-use plant" and investment made in such plants. The government will finalise the rules after considering comments on the draft by November 24.
The auction and the ordinance to facilitate it follows the Supreme Court's decision to cancel the allocation of coal blocks, which the Comptroller & Auditor General had criticised. CAG had estimated that coal worth Rs 1.86 lakh crore was given away. Swarup said 42 producing blocks mentioned in Schedule 2 of the ordinance and 32 that are ready to start production (Schedule 3) will be offered. Some of these would be auctioned and others would be allocated to state firms. The auction will commence on February 11 next year, and the winners of coal blocks will be informed by March 16.
The government expects these 74 blocks to produce 210 million tonnes of coal a year. This will contribute to Power, Coal and Renewable Energy Minister Piyush Goyal's target of doubling India's coal output to more than 1 billion tonnes a year and end fuel scarcity. The rules also allow the use of surplus coal in other plants of a company.
"A successful bidder or allottee may utilise coal mined from a particular coal mine in any of its other similar end-use plants by giving a prior intimation to the central government in writing and the central government may impose such terms and conditions as may be found necessary." State utilities would be allocated blocks depending on per-capita power availability in the states and future requirements. They will not be allowed to bring in private firms as joint venture partners in such blocks.
However, these PSUs or their joint ventures with private firms can participate in the auction to get more blocks. He said some states had already written to the coal ministry seeking allocation of coal blocks for power generation. Association of Power Producers Director-General Ashok Khurana said the industry was waiting for more details about the auction.
"The government has laid down a broad road map to ensure that new firms start mining soon and there is no disruption in the supply. A clear picture will emerge once the authorities concerned come up with specific rules and floor price, among others."
"The ultimate objective is to bring about a balance between consumer interest by ensuring lower electricity tariffs and efficient valuation of coal blocks. We are looking at keeping tariff rational and not maximising government revenues. We are also taking steps to see that the problem of coal shortage will be addressed, in the near future as well in long term," said Swarup, who hoped the output of the 74 blocks will replace large-scale imports of coal. The draft rules will be modified after feedback from stakeholders such as likely bidders, industry groupings and state governments.
In the draft rules, the coal ministry has allowed developers to swap coal produced from different mines for projects with the same end-use. The rules provide for a 'nominated authority' for the auction process. Swarup said it would be headed by a joint secretary in the coal ministry, Vivek Bhardwaj. The authority will identify eligible bidders for participation in coal block auctions and frame rules for penalties that can be imposed on coal block owners failing to meet milestones in a specified time frame.
It will also design the tender document with specific weightage for technical and financial bids for determining successful bidders. The authority will prepare a 'mine dossier' with details of geographical area, coal reserves, mine infrastructure, approvals and permits for each block. Swarup said companies such as Tata Power and Adani Power, which depend on imported coal for their plants, can bid for blocks. Tata Power's 4,000 mw ultra mega power project at Mundra is running at a loss because costs jumped unexpectedly following changes in Indonesian laws. Adani's 4,620 mw project, also at Mundra, faces a similar problem.