Firms with cancelled mines can bid in auction by paying levy

All firms which had their coal blocks cancelled by the Supreme Court, barring those convicted for offences related to mines allotment, can bid in the e-auction after paying additional levy, says the Ordinance on coal mines.

The companies engaged in specified end use plants like steel, cement and power, including ones having a coal linkage, also qualify to participate in the e-auction, said the Coal Mines (Special Provisions) Ordinance 2014, which got Presidential nod yesterday.

"A prior allottee shall be eligible to participate in the auction process subject to payment of the additional levy within such period as may be prescribed and if the prior allottee has not paid such levy, then, the prior allottee, its promoter or any of its company of such prior allottee shall not be eligible to bid either by itself or by way of a joint venture," said the Ordinance made public today.

Any prior allottee, convicted for an offence relating to coal block allocation and sentenced with imprisonment for more than three years, would not be eligible to participate in the auction, it said.

The apex court had last month quashed the allotment of 214 coal mines to various companies since 1993 on the ground that they were done in an illegal manner by an "ad-hoc and casual" approach "without application of mind".

It had determined additional levy of Rs 295 per metric tonne of coal extracted.
The Ordinance was brought to allocate coal mines and "vesting of the right, title and interest in and over the land and mine infrastructure together with mining leases to successful bidders and allottees with a view to ensuring continuity in coal mining operations and production of coal, and for promoting optimum utilisation of coal resources consistent with the requirement of the country".


The Centre will appoint an officer not below the rank of Joint Secretary as the "nominated authority" for the Ordinance, who may engage any expert to make recommendations for conducting auction and execution of the vesting order for transfer and vesting of coal mines.

The Authority will collect proceeds of the auction which will go to the kitty of states where the mines are located.

"The nominated authority shall, in consultation with the Central Government, determine the floor price or reserve price ... The successful bidder shall, prior to the issuance and execution of a vesting order, furnish a performance bank guarantee," the Ordinance said.
After the issuance of a vesting order and its filing with the central government and with the appropriate authority designated by the respective state governments, the successful bidder shall be entitled to take possession of the coal mine without let or hindrance, it said.

"A successful bidder or allottee in respect of Schedule II coal mines, may negotiate with prior allottee to own or utilise such movable property used in coal mining operations on such terms and conditions as may be mutually agreed to by them," it added.
It said the Centre may select a "Government company or corporation or a joint venture company formed by such company or corporation or between the Central Government or the State Government...any other company incorporated in India or a company or a JV company formed by two or more companies" for granting reconnaissance permit (RP), prospecting licence (PL) or mining lease (ML) through competitive bidding.
The ML is granted for undertaking operations for extracting minerals while PL is granted for undertaking operations for purpose of exploring. RP, on the other hand is granted for preliminary prospecting of a mineral through regional, aerial and geophysical surveys.
These companies may carry on coal mining operations in India, in any form either for own consumption, sale or for any other purpose in accordance with the permit, the Ordinance said.
Finance Minister Arun Jaitley had said that the e-auction process will be "transparent" and completed in "three to four months" with proceeds going entirely to the state governments where the mines are located.

The biggest beneficiaries would be the eastern states like Jharkhand, Odisha, West Bengal and Chhattisgarh. Madhya Pradesh, Maharashtra and Andhra Pradesh would also benefit.

Forty-two coal mines fall under Schedule II which are either producing or likely to start production soon.

"Where a successful bidder or allottee is not vested with any movable property of a Schedule I coal mine, then, he is not bound by any liabilities or obligations arising out of such ownership or contractual rights, obligations or liabilities which shall continue to remain with the prior allottee," the Ordinance said.

There are 204 mines under Schedule 1 category which are yet to be operationalised.
"In the event the successful bidder or allottee is unable to satisfactorily negotiate with prior allottee or any third party who has a contract with the prior allottee for the movable property, it shall be the obligation of the prior allottee or the third party to remove such movable property within a period not exceeding 30 days from the date of the vesting order, or the allotment order," it said.

The long-awaited "reforms" in the sector, a departure from the existing practice of allocation by a screening committee mechanism, got the go-ahead yesterday from President Pranab Mukherjee, who promulgated the Ordinance cleared by the Union Cabinet.