Government sets stricter norms for coal block allocations

The central government has finally decided upon the modalities for allocation of a set of 27 coal blocks following a prodding by the Prime Minister’s Office.

Even as the government is staring at the spectre of cancellation of allocation of coal blocks since 2005, the deadline suggests the government is now in a hurry to get through the process, which is already behind schedule, being earlier planned for December.

Stakeholders have been asked to respond by January 20, according to the draft Request For Proposal. The norms have been kept stricter than what was being speculated upon, it said.

For example, only steel, cement, sponge iron and surface gasification projects would be allowed to bid while coal mined from specified plants can’t be used for other uses even other projects, while actual environmental clearances, and not undertaking, are needed.

“The coal produced from the coal block shall only be used for captive consumption in the approved end-use plant. Bidder should have a valid environment clearance from ministry of environment and forests for its new end-use plant or expansion of its existing plant (not required for surface gasification end-use plant),” the request for qualification (RFQ) document said.

Also, the bidder should have completed the financial closure of the new end-use plant, a condition being seen as a major deterrent as banks have been demanding something opposite-  that borrowers should get coal supplies tied up before granting the loan for the project. The auction would be based on revenue share from mined coal to be expressed in per tonne terms above a floor price to be fixed later, the RFQ document revealed.  “The Rs /tonne multiple quoted by the preferred bidder as its price offer will be used for calculation of the payment to the government under the terms of the Coal Mine Development and Production Agreement,” it said.