New Delhi: The Cabinet Tuesday approved the 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.
"CCEA
has approved the methodology for auction by competitive bidding of the
coal blocks. The methodology provides for auctioning the fully explored
coal blocks and also provides for fast tracking the auction by
exploration of regionally explored blocks," the statement said.
The policy will ensure greater transparency and will pave the way for the government to auction explored blocks.
"The
process of bidding of coal blocks will be started very soon. The
government has fulfilled its commitment to bring transparency in the
allocation of coal blocks," Coal Minister Sriprakash Jaiswal said.
A source said six explored blocks will be auctioned first, with estimated reserves of over 2,000 million tonnes.
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.
The intrinsic value will be calculated on
the basis of net present value (NPV) of the block arrived at through the
discounted cash flow (DCF) method, the statement said.
"To
benchmark the selling price of coal, the international FoB
(freight-on-board) price from the public indices like Argus/Platts will
be used by adjusting it by 15 percent to provide for inland transport
cost which would give the mine mouth price," it said.
To avoid short-term volatility, the average sale price will be calculated by taking prices of the past five years.
For
the regulated power sector, a 90 percent discount will be provided on
the intrinsic value. This will help to rationalise power tariffs, the
government said.
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.
According
to the statement, the Ministry of Environment and Forests will review
details of coal blocks and communicate its findings before the areas are
put to auction. Final clearances will be subject to statutory
approvals.
The government said exploration activities in
identified blocks are at an advanced stage and are likely to be
completed soon. They will be auctioned under the Competitive Bidding of
the Coal Mines Rules, 2012, according to the statement.
The
Comptroller and Auditor General said in a report that allocation of coal
blocks between 2004 and 2009 without auction resulted in "undue
benefits" worth Rs 1.8 lakh crore to private entities.
This led to a furore in Parliament, with opposition parties seeking a probe into the matter. The CBI is investigating the issue.
The government allocated 14 coal mines to central and state public sector units, including four to NTPC, in July.
It had planned to auction 54 coal blocks with total estimated reserves of about 18 billion tonnes.
