Centre allays fears of coal bidders

Says power tariff won't go up; bars monopoly purchase by companies

The Centre on Wednesday announced draft rules for the e-auction of coal blocks and assured potential bidders that regulations would prevent power tariffs from going up after bids are placed.

The rules stipulate that the first set of coal blocks—74 out of 204 that the Supreme Court had declared “illegally allocated” in September—will only be appropriated after specifying end uses such as power generation. Further, there is a cap on the number of blocks a company can buy to avoid monopoly, Coal Secretary Anil Swarup told reporters. This would limit the amount of coal a company can get in the auction, which will be a two-step process, he added.

Forty-two of the first lot of coal blocks, which would be auctioned in February, will not be immediately available as the apex court had allowed them to continue operation till March 31. The coal secretary said the remaining 32 are ready to be produced and asserted that the auction would not be a “revenue maximising exercise”.

Of the 74 blocks, one category relates to mines with installed facilities that will be put to auction and the others will be alloted to state-run entities. Swarup said each of the bidding entities will have to furnish an additional levy of Rs 295 per tonne by December, as has been mandated by the Supreme Court.

By March 16, the government wants to complete the process of allotting mines to successful bidders, who will, in addition to a reasonable price for the coal block, pay a fair amount for the plant and equipment already installed there.

Existing operators of these mines, meanwhile, would get a fair amount for their investment, but will not have the first right of refusal or the right to match the best price, Swarup said.

The government’s assurance on the issue of power tariffs has come as a sigh of relief to those who had expressed concern that electricity rates would rise if power generating firms decide to recover the price they paid for the costly fuel from customers. While unveiling the draft rules, the coal secretary, however, said the government was still working on a more stable mechanism to put a cap on power tariff.