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Methodology for coal blocks auction to widen range of bidders

Last Updated: Wednesday, September 25, 2013 - 19:51

New Delhi: Hailing the government's decision to approve a new methodology for auctioning coal blocks, PHD Chamber of Commerce termed the move a step in the right direction as would kick-start a transparent process of allocating coal blocks and broaden the base of bidders.

"The decision would generate fresh confidence in industry and broaden the base of bidders to participate in the process of coal block allocation through the auction route," President of PHD Chamber of Commerce Suman Jyoti Khaitan said.

The auction route is considered a way forward as it can also provide an objective way of bench marking coal prices, he added.

The Cabinet yesterday approved a methodology for auctioning coal blocks, providing for upfront and production- linked payments and benchmarking of coal sale prices.

Coal blocks will be put for auction after the environment ministry reviews them and bidders have to agree to a minimum work programme, according to an official statement.

The policy will ensure greater transparency and will pave the way for the government to auction explored blocks.

The policy provides for production-linked payment on a rupee per tonne basis, plus a basic upfront payment of 10 percent of the intrinsic value of the coal block.

To ensure firm commitment, there will be an agreement between the ministry and the bidder to perform minimum work programmes at all stages.

There would be development stage obligations in terms of milestones to be achieved such as getting mining leases and obtaining environment/forest clearances, while the bidder will have to give performance guarantees.

The policy also provides for relinquishment of a block without penalty if the bidder has carried out the minimum work programme stipulated in the agreement.

The industry has been demanding an alternate mechanism to explore coal production since long, especially after the discretionary basis adopted for allocation of coal blocks by government landed in controversy.


First Published: Wednesday, September 25, 2013 - 19:51
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