New round of coal auction with old and rejected mines, same problems

As the Centre revives the earlier rejected coal mines by auctioning them again, the move could actually be to ease pressure off the national miner Coal India Limited (CIL).

For the upcoming two rounds of the auction of coal mines, the Centre has notified 18 mines of which 14 are the ones which were put up for auction and didn’t Illinois it any interest. The mines would be offered only to steel, iron and captive power units. There are no mines offered to power generators.

However, the captive power producer is allowed to sell up to 25% coal if it is surplus, in the open market.

The last two tranches of the auction in 2016-17 were cancelled after no buyer came up. The mines were put for non-power sector. Steel sector said the mines are not large enough and also sector was undergoing stress to bid for new mines. Some mines were undergoing litigation.

Post a judgment of the Supreme Court in August 2014 cancelling all coal blocks allocation of the past two decades, the ministry of coal started re-allocation through transparent e-auctions. It allocated 34 operational coal mines to private companies through auction and to states through allotment – for both power and non-power sector. The revenue estimated to be collected is Rs 28.5 billion over 30 years for mine bearing states. In the first-ever e-auction of coal blocks during 2014, 34 coal blocks in three tranches went to private companies including HINDALCO, BALCO, Jindal, JSW, Adani, GMR, Essar among others. Later, five mine allocations were cancelled.

The latest tranche of coal auction is coming at a time when power plants and non-power sector are raising questions over the production of CIL.

CIL has been unable to match the speed of power demand and has been diverting coal to only power sector, ignoring non power sectors, as alleged by steel and iron ore industry. Railways is giving priority to power consumers by supplying 80 per cent of rakes for CIL coal.

For the power sector, the coal production growth has been lower than power demand.

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