Govt to end stalemate in coal sector; plans e-auction of mines

In a major move towards energy sector reforms, the Cabinet recommended promulgation of an Ordinance to facilitate e-auction of coal blocks for private companies for captive use and allot mines directly to state and central PSUs.

The move comes against the backdrop of the Supreme Court last month quashing allocation of 214 coal blocks to various companies since 1993.

"The Cabinet has recommended promulgation of an Ordinance to the President in order to resolve the pending issues particularly the situation arising out of the Supreme Court judgement quashing the allocation of the coal blocks," Finance Minister Arun Jaitley said briefing the media after the meeting.

State sector requirements including those of the Central and state governments would be met and coal mines would be allocated to PSUs like NTPC or state electricity boards.

"As far as the private sector is concerned, the actual users of coal in the cement, steel and power sectors who apply for a certain number of coal mines will be put in the pool and there would be an e-auction. A sufficient and adequate number of mines would be put so that actual users go back with the mines," he said.

Jaitley said the auction process would be "transparent" and completed in "three to four months" with proceeds going entirely to the state governments where the mines are located.

"The entire mess that the UPA had left behind from 2005 onwards over the next four months would be cleaned up," he said, adding coal worth $20 billion which was being imported annually would be domestically substituted through this measure.

The biggest beneficiaries would be the eastern states like Jharkhand, Odisha, West Bengal and Chhattisgarh. States like Madhya Pradesh, Maharashtra and Andhra Pradesh would also benefit.

"This will financially empower particularly the eastern states (which have most of the coal mines) and lakhs of labourers would get employment while bank capital held up with the allottee companies would be fruitfully utilised," the Finance Minister said.

Jaitley vehemently denied a suggestion whether the process could be termed as "de-nationalisation" of the coal sector saying, "The original Nationalisation Act remains and will remain and Coal India Ltd will be fully protected."

Asked whether the companies whose allocations were cancelled by the apex court would be allowed to participate in the e-auction, Coal Minister Piyush Goyal who was also present at the briefing, said "Any convicted company will be debarred."

On whether the Coal Mines Nationalisation Act, 1973 would be amended to allow commercial mining, Goyal said an enabling provision for future commercial use of mines would be there as an amendment. "This is only for the future," he said.

"There will be an enabling provision for the future where under rules which are framed for commercial users of mines could also be decided by the Central government. This would lead to an optimal utilisation of the natural resource."

Replying to questions on the fate of Coal India, Jaitley said, "This process would not in any way impact the structure of Coal India. Coal India would continue to function as it is and all the mining requirements of CIL in present and future will be adequately protected."

CIL at present accounts for over 80 per cent of the domestic production. Private companies having end-use plants like steel, cement and power used to get mines through screening committee mechanism.

The coal blocks were allocated by a screening committee mechanism. There was a political hue and cry particularly after the report of  the Comptroller and Auditor General (CAG) which alleged arbitrariness and absence of any criteria on basis of which blocks were allocated, leading to the loss of Rs 1.86 lakh crore to national exchequer.

"The matter was taken to the Supreme Court through a public interest litigation. The SC quashed the entire allocation. The government had requested the SC that issue needed to be decided expeditiously because power sector, cement and steel were going to suffer."

Jaitley said the transfer of land will be automatic and the owner of the land would be compensated.

On allowing foreign players in auction, Jaitley said only companies incorporated in India would be allowed to participate in the bidding for which the reserve floor price will be determined by a committee and the auction will be sector-specific.

There will be no right of first refusal and all bidders will have to compete in the e-auction through reverse bidding.

He also assured that all environmental concerns will be taken care of.

The apex court had last month quashed allocation of 214 out of 218 coal blocks alloted to various companies since 1993, terming the method as "fatally flawed".

It had allowed the Centre to take over operation of 42 such blocks which are functional.

The Coal Ministry has drafted the Ordinance after extensive consultations with Attorney General Mukul Rohatgi.