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Mine developers to face penalty in case of delays: Coal ministry

Winning bidders may also face termination of the agreement if there is an inordinate delay.

By: ENS Economic Bureau | New Delhi |
April 24, 2015 3:50:47 am

The winners of coal blocks auctioned recently may have to incur phased deduction of their performance security if they fail to develop their mines in a time-bound manner and may also lead to termination of agreement to develop their blocks, the coal ministry has proposed.

Prescribing strict timelines for developing the blocks, the ministry in its draft model contract agreement for coal mining has said the winning bidders may also face termination of the agreement if there is an inordinate delay in development of the mines.

According to the agreement, if an operator does not succeed in commissioning of its mine on agreed time, then the firm would have to shell out damages “at the rate of  0.5 per cent of the performance security for each day’s delay and to a maximum of 30 per cent of the security.” Upon reaching the maximum deduction, the nominated authority (NA) of the coal ministry would be empowered to decide on terminating the agreement.

As per the timelines set by the NA, the mine developer would have to apply for transfer of statutory permission to the successful bidder within one month and complete the process within three months. If the mine developer finds  that the prior allocattee had deviated from the approved mining plan, it should report the same to the NA within four months. Within the next six months, the deviations should be ratified or a fresh mining plan should be approved. The mine developers should seek approval of the respective state government on mine close plans within six months and open an escrow account in as many months. The developer should adhere to the production schedule and also synchronise its end use plant as per the approved mining plans.

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