Coal block allocation may be done on discretionary basis: Experts

NEW DELHI: The new coal bill may allow the discretionary allotment of mines, as experts say a new clause in the proposed law can be interpreted as facilitating such action. However, coal ministry officials say the clause has been inserted only to allow tariffbased bidding.

Section 5(1) of The Coal Mines (Special Provisions) Bill, 2014, says the government can allot coal blocks deallocated by the Supreme Court not only to public sector units or joint ventures between two or more government companies but also “to a company which has been awarded a power project on the basis of competitive bids for tariff (including Ultra Mega Power Projects)” or UMPPs.

“This means that even private companies can be allocated coal blocks without an auction,” according to Dipesh Dipu, an energy consultant teaching at Hyderabad’s Administrative Staff College of India. But a coal ministry official said the provision is aimed at facilitating projects for which the power ministry has sought bids.

“In the Supreme Court judgement (scrapping coal block allocations), UMPPs (awarded through auctions) had been exempted from the de-allocation. This is the same clause. Some coal blocks are earmarked for the power ministry, for UMPPs,” the official said. This clause, he added, is “only for new projects”.

Vinayak Chatterjee, chairman and managing director of infrastructure consultancy Feedback Infra, said there’s nothing wrong with the clause. “Any company awarded a power project — whether a UMPP or not — on the basis of a competitive bid for tariff will factor in the cheaper price of coal due to the captive block before bidding.” However, Dipu feels that the provision creates a loophole that can be exploited. “Even a company which has won a tariff-based bid using calculations based on hydel or imported coal becomes eligible for such an allocation,” he says.

“Rules that may be formulated in the future might better specify eligibility of the power projects. But as of now, this does create ambiguity.” It boils down to a question of phrasing, the official cited above said. “Laws cannot be amended every day. You have to budget for future situations that might arise so that the bill stands the test of time. Therefore, there needs to be some flexibility.”

It is possible that the power ministry might want to, in the future, auction even smaller power projects after pairing them with coal blocks, as was done for the UMPPs and that’s why the Bill says “including UMPPs”.

This, however, also creates the possibility of backdoor manoeuvres. “Including UMPPs” means any company with a power-purchase agreement (PPA) is eligible for such an allotment.