India will soon begin auction of coal blocks for commercial mining as the Union cabinet led by Prime Minsiter Narendra Modi on Wednesday approved the methodology that puts an end to the monopoly of state-run Coal India.
The Cabinet Committee on Economic Affairs approved the methodology for auction of coal and lignite mines on revenue sharing basis. This methodology provides that bid parameter will be revenue shared.
"The bidders would be required to bid for a percentage share of revenue payable to the Government. The floor price shall be 4 per cent of the revenue share. Bids would be accepted in multiples of 0.5 per cent of the revenue share till the percentage (of revenue share is up to 10% and thereafter bids would be accepted in multiples of 0.25% of the revenue share," said the Centre in a statement on Wednesday.
Finance Minister Nirmala Sitharman had last Saturday, opened the coal mining sector for private participation.
With easy entry and exit norms for commercial coal auctions the government expects participation from Indian companies like Hindalco, Jindal Steel & Power, JSW Energy, Adani Group and Vedanta besides global miners like Peabody, BHP Billiton and Rio Tinto.
"Commercial mining in coal sector to be brought in and government monopoly will be removed. Government will introduce competition, transparency, and private sector participation in the coal sector through revenue sharing mechanism instead of the regime of fixed rupee/tonne. 50 new coal blocks for commercial mining will be offered immediately," Sitharaman had said.
Rs 50,000 crore to be spent by the Centre for evacuation of mined coal. The investment of Rs 50,000 crores is for the evacuation of enhanced CIL's (Coal India Limited) target of 1 billion tons of coal production by 2023-24 plus coal production from private blocks.
"The methodology is oriented to make maximum coal available in the market at the earliest and it also enables adequate competition which will allow discovery of market prices for the blocks and faster development of coal blocks," said a statement by the Centre after Union Cabinet's meet.
The Cabinet also permitted commercial exploitation of the coal-bed methane present in the mining lease area.
"This methodology provides incentives to the successful bidder by way of offering rebates in revenue share in events of early production of coal from the coal mine and the total quantity of coal consumed or sold or both for gasification or liquefaction on an yearly basis from the coal mine," said the statement.