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Government finally takes ordinance route for insurance reforms, coal block auctions

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The Cabinet on Wednesday gave its approval to an ordinance on auction of the coal blocks and rules on e-auction. With this, the allocation of the 204 mines, which were cancelled by the Supreme Court, will be back on the track. The Cabinet has also approved ordinance route for insurance reforms. First lot of 41 mines will be auctioned in February. 

The government claims that the state governments will get almost Rs 7,00,000 crore in the next thirty years on account of the reserve price and royalties that they will get. Coal and power minister Piyush Goyal has claimed there will be no hike in electricity prices. 

The Ordinances have been promulgated to increase the Foreign Direct Investment (FDI) cap in the insurance sector to 49% from the current 26%. The ordinance on coal is essentially to allot mines directly to the central as well as the state public sector companies and also take forward the e-auction of the coal blocks to be used as the private companies as captive assets. 

Bills pertaining to both the issues – the Insurance Laws (Amendment) Bill 2008, and Coal Mines (Special Provisions) Bill – could not be passed in the Rajya Sabha owing to the stiff opposition from Congress and other parties, which were putting a united front against the passage of the Bill in the Rajya Sabha. 

Going forward, in case of the unregulated end-use sectors like steel and cement, the highest bidder will win the blocks. Even though the floor price will derived in the basis formula to ascertain the net intrinsic value of each block, it will not be below Rs 150 per tonne. The auction will be held on a website on which the bidders will have to register themselves. Coal secretary Anil Swarup said the website will go online Thursday. The auctions will take place in February. 

“Beyond the first lot of 41 mines, the government expects to start the process rolling for a total of 101 blocks by March 31. The remaining mines would be processed thereafter,”Swarup added. 

“There are 380 million tonnes of coal lying in these mines and when extracted will help us stop imports and take us to the target of one billion tonnes of coal production in the next few years,” Swarup said.

"Mine owning states will get reserve price and royalty, while power consuming states will be benefited through tariff reduction," he said.

“Payment to states from these 204 cancelled mines on account of reserve price to be collected by them, and royalties, is estimated to be Rs.700,000 crore over a thirty-year period.

 

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