Coal blocks auction: Steel makers set to benefit

Sumit Maitra

Steel companies that rely on imports to meet their coal requirements stands to benefit from the auction of commercial mines. Of the total 41 mines being offered, 37 are non-coking, two are coking while two are combo mines i.e. coking plus non-coking mines are put up for sale.

Aluminium, steel, cement and power companies have been buying coal at a premium in auctions. Aluminium industry stands to benefit from the joint auction of bauxite and coal blocks and it will help in bringing down electricity cost of aluminium smelters.

“However, the planned commitment to build evacuation infrastructure will take some time to build. The material impact of the reforms in terms of import substitution, state revenue generation and employment generation can be observed in 1 to 1.5 years’ time. Having said that, the Schedule 2 mines should be productive at an earlier timeline,” Saurabh Bhatnagar, Partner and National Leader, Metals & Mining, EY India said.

Key technical features of bidding process

♦ Migration to percentage revenue share from rupee per ton ♦ No technical and financial eligibility criteria ♦ Minimum number of bidders require in the first attempt reduced to 2 from earlier 3 ♦ Floor price is 4% of revenue share ♦ Bids in multiples of 0.5% of revenue till it reaches 10% and thereafter in multiples of 0.25% ♦ N o affiliate of bidder allowed to bid for the same mine ♦ If there are 2/3 Technically Qualified Bidders, all shall be qualified ♦ If there are 4/6 TQB, lowest ranker shall be eliminated ♦ No TQB shall be eliminated if number of qualified bidders after elimination is less than 3

Key favourable features for bidders

♦ Bidding terms allow unified regime – along with coal, minerals such as CBM and minor minerals can be extracted ♦ Coal ministry to share responsibility of getting statutory approvals. Agency hired to liaise with states/regulatory authorities ♦ Greater flexibility in coal production schedule: at least 65% of scheduled production every year and 75% in a block of 3 years ♦ Incentive for early coal production and utilisation of coal in gasification and liquefaction: 50% rebate in revenue share for early production ♦ Relaxed payment structure ♦ Reduced financial burdens and liberal financial terms ♦ 20% upfront amount, bidders can mortgage mines ♦ Upfr ont amount is 0.25% of value of estimated geological but capped at `500 crore

Apart from the auction, Prime Minister’s announcement to gasify 100 million tons of coal by 2030 will be a big boost to coal gasification in India and fulfill vision of ‘Atmanirbhar Bharat’ using clean coal technology, Naveen Jindal said.

JSPL had built country’s first coal gasification plant and the first in the world to produce direct reduced iron (DRI) using domestic coal.

Aim to reduce imports

The auctioning is part of the series of announcements made under the Atmanirbhar Bharat initiative with an aim that India is expected to save around `30,000 crore annually on import bill of thermal coal once commercial mining from these mines pick up.

“Atmanirbhar Bharat means India doesn’t need to import coal and can use that money to spend on social welfare. Whatever we import now, we would be exporting them. We will take each and every product and service and work holistically to make India self-reliant on every such sector,” the Prime Minister Narendra Modi said during the event.

“We are also taking coal sector out of the impact of the lockdown as well. A country which is part of the largest producers of coal with fourth largest coal reserve should be the largest exporter as well,” he added.