Commercial mining norms may be eased following feedback

Coal Insights Bureau

Government may tweak some of the draft norms of the commercial coal mining to ensure adequate response from the mining industry.

After releasing the discussion paper on the draft commercial mining norms, coal ministry conducted stakeholders’ meeting across major cities in Delhi, Kolkata and Mumbai.

Vinod Kumar Tiwari, additional secretary, Coal ministry along with Shekhar Sharan, chairman cum managing director of CMPDIL conducted the meeting in Kolkata. There was wide response to these meetings where companies interested in bidding in the planned auction participated and expressed their views. The government is currently studying the feedback to incorporate changes to the draft rules.

Key concern areas

Absence of faster exit clause, high floor price of 4 percent revenue share for bidding coupled with minimum incremental bid of 1 percent, chances of bids going up to unrealistic levels because of open e-auction, high financial commitment in the form of upfront amount and bank guarantee are some of the major areas of concerns of prospective bidders in the proposed auction of coal mines for commercial mining.

Restricted exit clause for investors bagging coal blocks under revised and relaxed auction norms at a time when coal is no more a prized commodity globally and particularly on the backdrop or rising popularity of renewable energy sources is another concern raised during recent stakeholders’ meetings conducted by the coal ministry in several cities.

Floor price

As per draft norms, bidders would be required to bid for a percentage share of revenue payable to the government.

The floor price shall be 4 percent of the revenue share. Bids would be accepted in multiples of 1 percent of the revenue share till the percentage of revenue share is up to 10 percent and thereafter bids would be accepted in multiples of 0.50 percent of the revenue share.

The floor bid value is on a higher side considering some recent deals on coal mines and conducting electronic auction using that as the base would only drive up bid values to unsustainable levels, Partha Bhattacharyya suggested.

Interest of foreign miners

Considering current global scenario, there would be little or no interest from foreign merchant miners, a stakeholder suggested on condition of anonymity.

Bids would largely come from coal consuming industries like power, cement and coal for captive usage with little interest in commercial sale, another stakeholders suggested.

Timeline

The government would initiate the first round before the fiscal ends.

In its response to the discussion paper, Federation of Indian Mineral Industries (FIMI) suggested that coal blocks which