Panel to seek Cabinet nod for coal reserve price methodology

NEW DELHI: An inter-ministerial panel today decided the methodology for fixing the reserve price for coal auction and will seek the Cabinet approval for the same.

The committee met today and decided on methodology for fixing the the auction start price or the reserve price for allotting coal blocks whose allotments were quashed by the Supreme Court in September, sources close to the development said.

The panel comprises secretaries of finance, power, steel, law, mines, petroleum, industrial policy and promotion and coal ministries.

"The Cabinet will take the final call on fixing methodology for reserve price....," the source said.

The government had in 2012 constituted inter-ministerial panel (IMC) to consider and examine the formulation of methodology for fixing floor/reserve price of coal blocks to be allocated through auction.

Based on recommendations of consultant Crisil, it had proposed allotting coal blocks only to government companies or to power plants with tariff-based bidding, to ensure that the benefit of cheaper domestic coal is passed on to consumers.

However, after the Supreme Court on September 24 cancelled allocation of 204 coal blocks, it was felt that there would be many existing power plants, which were linked to these mines, or power plants, which have no tie-up for coal and would either have cost-plus power purchase agreements (where tariff is fixed by power regulator) or would have contracted agreements to sell electricity on the basis of bid tariff.

Sources said it was felt that the methodology decided by the IMC previously needs to be reopened and a new one adopted.

The apex court had quashed allotment of 204 coal blocks to various companies between 1993 and 2009. Out of these, 37 are running coal mines and another five are ready to produce by April.

Sources said the government wants to clear all roadblocks and meet conditions precedent for the new owner of the mines, which will be decided through an e-auction, to takeover operations of the 42 mines from April next year.

The 37 running mines produced about 38.14 million tonnes of coal in 2013-14, while the five others are likely to chip in with another 5.85 million tonnes.

Keen to avoid any supply disruption, the government on October 21 promulgated an ordinance to revert half of these 42 mines to the government entities that were the original allottees. The remaining 21 will be put on auction in the first phase of bidding that will be open for end users in power, cement and steel sectors.

If the winner of these 21 mines is different than the one already operating, the existing owner will be paid compensation and operations handed over to the winner, they said.