Chhattisgarh may gain most in 1st round of auction

NEW DELHI: The coal block auctions are expected to provide healthy cash flow to some of the cash-strapped eastern states led by debt-laden West Bengal. But Chhattisgarh, which has amongst the highest proportion of fiscal deficit, may end up raking in the maximum amount in the first round since it has a large number of blocks that were cancelled by the Supreme Court.

West Bengal has in the past sought Centre's assistance to deal with its heavy debt burden. In 2013-14, West Bengal's debt as a proportion of gross state domestic product (GSDP) was estimated at 34.6%, the highest among the non-special category states. One of the key reasons for the high debt ratio was the state's inability to generate its own resources, but that may see an improvement, starting this year itself.

While announcing auction of all coal mines to private sector, finance minister Arun Jaitley made it clear that the entire proceeds from the auction will flow to the states. So far, states are only entitled to royalty from minerals, including coal, and have for long complained of inadequate compensation. In fact, over the years, the mineral-rich eastern states have complained that they have not been compensated adequately.

But, the auctions may change the equations, even if to a limited extent. Although no estimates are available, the coal mines are expected to fetch hefty income from the auction as over 40 companies whose allocations were cancelled are expected to bid aggressively to ensure that their plants don't shut down for want of fuel. With coal and power minister Piyush Goyal further announcing that companies will not have the right of first refusal, the bids are going to be high.

In terms of the gross fiscal deficit (GFD) parameters, Goa was worst placed with GFD of 4.9% of GSDP in 2013-14, data available on RBI website showed. Next were Chattisgarh and Madhya Pradesh at 3% of GSDP, followed by Andhra Pradesh (2.8%), Jharkhand (2.2%) and Odisha (2%).

The Supreme Court ruling has the highest impact on BJP-ruled Chhattisgarh, which may turn out to be the biggest beneficiary of the auctions, at least this year.