Private sector seeks “level playing field” in coal block auction for commercial minning

Private sector companies scouting opportunities for commercial coal mining in the country are seeking a “level playing field” to encourage them to participate in the bidding process, sources said on Tuesday. Given the international scenario, global mining companies are looking to gradually reduce their exposure and investments in the coal sector and this will have an impact on FDI in commercial mining, private companies’ officials said.

“If the government does not provide the level playing field to private sector firms for commercial mining, the interest among mining firms will not take-off as it was envisaged earlier,” an official of the country’s leading private sector conglomerate told PTI. The opening up of commercial coal mining for private sector is the most ambitious reform since the nationalisation of this sector, ending the monopoly of state-owned Coal India Ltd (CIL).

Ministry of Coal is holding consultative meetings in various cities with the stakeholders to discuss the draft methodology as well as key bidding terms and conditions for auction of coal mines for commercial mining. A closed-door consultative meeting on the proposed coal block auction for commercial mining was held in the city on Tuesday and some 15-20 representatives from mining companies and associations participated in it, sources said. Many stakeholders stated that a “penalty clause” is a major deterrent and will “not encourage serious commercial miners to participate in the bidding process”.

Explaining about “level playing field”, the official of the private sector company said that there is “no penalty clause” in case of Coal India while they will have to bear a risk to pay, if production quantity is below a threshold level “We have also sought clarification about computation of the penalty for production below 70 per cent of the targeted output in three years,” the official said. Central Mine Planning & Design Institute Ltd chairman Shekar Saran said the government has relaxed several conditions to make bidding attractive.

“The Centre expects large participation in the auction process,” he said. However, officials private sctor companies said several financial institutions and mining majors had either stated to exit coal business or given a roadmap to reduce their exposure toward the polluting sector.

Coal sector analysts claimed that after cancellation of allocations of captive coal mines by the Supreme Court, some 80 blcoks were auctioned and only 18 projects had taken off. The government had said that the first round of auctioning of blocks for commercial mining is expected to be launched in the current fiscal. There are about 80-100 coal blocks which are likely to be auctioned in multiple phases over the next few years.

Source: Financial Express