Even as coal shortage continues to plague India Inc. and coal consumers clamour for new linkages, the government has found no takers for the three coal blocks put up for competitive bidding. This raises doubts over the success of similar auctions being planned by the Ministry of Coal (MoC) in the future. It also partly invalidates the arguments put against the earlier policy of free allocation of blocks for captive coal mining.

The excitement over competitive bidding was built up over months together but fell flat as only two parties showed interest for the auction of one block, while the other two blocks drew no response at all. The lack of interest came as a surprise to the Central Mine Planning and Design Institute (CMPDI), the executing agency which floated the notice inviting application (NIA) for the said blocks in February this year.

"Only two companies submitted bids for one block – Andal Babuisol. For the other two blocks – Jhirki & Jhirki (West) and Tokisud-II – there has not been any bid at all," CMPDI sources said.

This was more baffling as, initially, around 40 Indian companies had bought the bid document, expressing interest to take part in the auction. Again, it was at the behest of these potential bidders that the last date for submission of bids was extended to June 25 from May 28.

Now that the exercise has proven almost futile, CMPDI was not sure about the fate of these blocks. Asked if there would be retendering, the sources said that the outcome of the bidding has been intimated to the Ministry of Coal (MoC). "Now the ministry has to take a call whether to go ahead with the process or think otherwise," they said. There, however, was indication that the ministry may scrap the auction altogether.

Earlier, in February 2014, CMPDI had announced that the blocks would be auctioned by competitive bidding for specified end-users. Accordingly, under Rule 3 of the Auction by Competitive Bidding of Coal Mines Rules, 2012, the said blocks were offered for auction for mining to companies engaged in production of steel, cement and sponge iron.

Jhirki & Jhirki (West) was earmarked for steel (blast furnace), while Andal Babuisol was demarcated for sponge iron and Tokisud-II was to be allocated for cement. The three blocks, located in Jharkhand and West Bengal, have approximate geological reserves of 499.443 million tons.


Blocks put up for competitive bidding

 

Block name

Coalfield

Area (in sq. km.)

Approximate reserves (in mt)

Permitted end-use

Jhirki & Jhirki (West)

West Bokaro (Jharkhand)

2.705

267.91

Steel (blast furnace)

Andal Babuisol

Raniganj (West Bengal)

3.66

103.841

Sponge iron (DRI)

Tokisud-II

South Karanura (Jharkhand)

2.25

127.692

Cement

 

 

 

 

 

 

New block auctions

Meanwhile, MoC announced on July 1 that it was considering auctioning another 25 coal blocks which were taken away from earlier allocattees due to lack of progress.

“There are 25 de-allocated coal blocks where court cases have not been filed as per information available. These coal blocks could be considered for allocation under the new dispensation,” an official document said.

But CMPDI was still in dark. At the same time, it seems to be doubtful about the likely response from potential bidders.

“We cannot comment on this (future auctions) as we are yet to get any communications from the ministry,” a source said.

Asked if auction of the next round of blocks could fetch a better response, the source said, "It is difficult to guess the mood of the market. About 40 companies had shown interest and collected bid documents for the competitive bidding of those three blocks, but when it came to participation, only two of them turned up."

Another industry source pointed out that the poor response for auction of blocks invalidates the arguments put against the earlier policy of free allocation which resulted in the coal scam.

“It can be argued that there was nothing wrong in the policy of free allocation, because if the government went for auction of those blocks, hardly anybody would have purchased. The objective was to increase coal supply and the free allocation, at least to some extent, helped in achieving that,” he said.