Cumulative proceeds from the first two rounds of the ongoing electronic auction of coal blocks are likely to have crossed Rs 2 lakh crore on Monday, buttressing the national auditor’s claims that allocation of mines over the years had caused substantial losses to the exchequer. The CAG had, in a report three years back, pegged the notional loss to the national exchequer at Rs 1.86 lakh crore on account of improper allocation of coal mines over the years.
“Likely proceeds from coal block auctions cross Rs 2 lakh crore. These include e-auction proceeds, royalty proceeds and upfront payment,” coal secretary Anil Swarup tweeted on Monday. Besides subsuming the royalty and upfront payments, the coal ministry’s estimate of Rs 2 lakh crore also includes an amount of Rs 97,000 crore as “additional tariff benefit” that would accrue to electricity consumers through reverse auction of coal blocks, according to Swarup.
Coal minister Piyush Goyal, in a tweet, said that the e-auction of 32 coal blocks, out of 204 cancelled coal blocks, “has already yielded potential e-auction revenues, royalties & upfront payments of Rs 2.07 lakh crore, which is far in excess of CAG loss estimate of Rs. 1.86 lakh crore.” Prime Minister Narendra Modi had earlier this month at a rally in Madhya Pradesh referred to the Rs 1.10 lakh crore generated by auction of 19 blocks and said his government had proved the then CAG right.
In a severe indictment of the earlier UPA government, the public auditor had in 2012 argued that due to the allocation of coal blocks to private firms, the exchequer had lost substantive revenues, triggering a nation-wide uproar. In its wake, the Supreme Court in September 2014 cancelled the allotment of 204 coal mines after holding their allocation as “arbitrary” and “illegal”. Out of the revenue of Rs 1 lakh crore generated in the first tranche of auction of 19 coal blocks, the exchequer of coal-rich states would get Rs 88,662 crore spanning over the next 30 years. In the second tranche, with 13 out of the 15 blocks having been put on the block, the cumulative proceeds have already touched Rs 2 lakh crore.
Among the gainer are two major firms that have managed to reclaim the coal blocks that they had prior to the auctions — Jindal Steel and Power Limited (JSPL) and Sunflag Iron and Steel. While JSPL retained Gare Palma II & III in Chhattisgarh, Sunflag retained Belgaon mine in Maharashtra.
In all, the government plans to auction nearly 110 coal mines (with reserves of 265 million tonne), of which it has already auctioned 19 operational blocks in the first tranche last month. In the current tranche it has already offered 13 out of 15 ready-to-operate coal blocks, which despite having evacuation infrastructure constraints, has seen enthusiastic participation from the bidders. A total of 45 mines have been earmarked for allocation to state-run companies and the remaining for auction.
Two prescribed methods for the auctions being followed by the bidders include — forward bidding (for unregulated sectors like steel, cement and captive power) and reverse bidding (for specified end use for power generation). In the reverse mechanism, the government sets a ceiling price that is broadly representative of production cost of state-run Coal India. In this methodology, the companies bidding for power sector blocks, where tariffs from the end-use plant are regulated, are expected to bid at lower price. For instance, if the ceiling price is Rs 800 and the bidder quotes Rs 600, then the benefit of Rs 200 is directly passed on to electricity consumers by way of tariff concessions. In forward bidding, the company quoting the highest price wins the mine.
During the first three days of the second tranche, beginning March 4, the nine mines have been bagged by industry biggies such as Adani Power, Hindalco, JSW and Jindal Power Limited among others for over Rs 40,000 crore. On Monday two mines—Lohari in Jharkhand and Utkal C in Orissa were auctioned, while the Jamkhani mine would be offered on Friday. Following observations by Delhi and Jabalpur High Courts, the coal ministry is learnt to have taken five mines out of the list of blocks to be auctioned.