Centre drafts rules for coal mine auctions

NEW DELHI: The Central government on Wednesday came out with draft rules for coal mine auctions, which clarify that there would be no restrictions on sale of coal mined. It also said that the auctioning will begin this year.

“There shall be no restriction on the sale or utilisation of coal from the coal mine. The successful bidder shall be free to sell coal in any manner … (and) utilise coal for captive consumption and export,” the draft rules said.

While a Cabinet decision taken earlier this month, amending the Mineral and Mining Development Act, had made it clear that end-use retrictions would be removed, the presence of a state-regulated price cap for the sector had left miners confused whether the market was truly being liberalised.

The rules state that bidders — who can be any company registered in India, including those with 100 per cent FDI, as well as state-run companies — would have to bid for a share of revenue payable to the Centre, with a floor price of 4 per cent of the revenue share. Some 74 mines are to be put up for auction.

The upfront amount payable to the Centre will be 0.5 per cent of the value of estimated resources of the mine. Currently, miners have to pay 10 per cent of the estimated value. “This huge payout, as well as restrictive clauses like price caps and end-use restrictions, had meant that Indian mines did not interest any foreign bidder till now,” said a coal ministry official.

As a result, a round of auctions held in October were not very successful, with many mines left unbidden for. The government said that “the Ministry of Coal is initiating the process for auction of coal mines for sale of coal. Expected to be held in multiple tranches, the first tranche is proposed to be launched this fiscal.”