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Friday, December 04, 2020

Auctions for commercial coal mining: Conservative bidding in phase 1; low revenue sharing welcomed

Auctions of 18 coal blocks for commercial use have been completed, with experts noting that the revenue share offered by bidders was lower than expected.

Written by Karunjit Singh | New Delhi | Updated: November 9, 2020 2:44:17 am
The government is set to announce the results on November 11.

The first phase of auction of coal blocks for commercial use witnessed conservative bidding from industry players due to the type of blocks on offer and potential issues around land acquisitions and forest clearances, according to experts. Auctions of 18 coal blocks for commercial use have been completed, with experts noting that the revenue share offered by bidders was lower than expected.

The government is set to announce the results on November 11. It had, in June, announced that coal blocks would be auctioned for commercial use, as part of the Aatmanirbhar Bharat package, with the aim to reduce coal import and increasing job opportunities in coal-bearing areas.

“My view is that there has been conservative bidding, the premiums have been very low and the benefit to the exchequer will accordingly be less,” said an expert with one of the companies involved in the bidding process, noting that the successful bidders would benefit significantly from revenue sharing agreements.

He also noted that a number of the mines put up for auction were in forested lands and that issues around obtaining forest clearances and land played a role in lack of interest for the mines the government had offered. The revenue share offered by bidders for large coal blocks with annual peak rated capacity of over 3.0 million tonnes has ranged from 12.5 to 25 per cent, with the Urma Paharitola block in Jharkhand attracting the highest bid of 26.5 per cent from Aurobindo Realty and Infrastructure Pvt Ltd. among the larger coal blocks on offer.

The auctions have not garnered the level of interest that the Centre had indicated while announcing the first set of 38 coal blocks to be offered for commercial mining. Only 23 of the blocks received bids, with only 19 which received two or more bids being put up for auction.

“The initial trend of these biddings suggest that companies are bidding conservatively, unlike in the 2016 auctions. Although some competition was observed in couple of smaller blocks, even ready to operate blocks couldn’t attract aggressive bidding till now, “ said Debasish Mishra, partner at Deloitte India. He also noted that there was little interest from international players as they were moving towards reducing their coal investments.

Another industry source said that many companies had welcomed the new auction system involving revenue sharing instead of fixed payments per tonne.

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