KOLKATA (miningweekly.com) - India’s Coal Ministry is working to overhaul the coal block auction policy to overcome a lack of interest from prospective bidders.

According to an official involved in the rejig, one of the proposals tabled was securing all mandatory approvals required for mine development prior to the identified block being put up for auction.

Prior approvals could be secured for environmental impact and forest clearances but actual land possession would have to be taken by the successful bidder in view of the legalities involved in land acquisition and possession, he said.

Another option on the table was the creation of a specialised corporation along the lines of the Power Finance Corporation Limited, which bid for ultra-mega thermal power plants, he added.

Such a specialised agency could be entrusted with identification of coal blocks, reserves exploration, securing mandatory clearances and even acquiring the land before the blocks are put up for auction.

The overhaul of the auction policy had been undertaken following a directive from Coal Minister Piyush Goyal, who expressed concern over the fact that no bidders were forthcoming for two blocks that had been put up for auction as a test case, the official said.

Even the list of coal blocks planned for auction to user industries in the steel and cement sectors would be re-drawn as the list was originally made way back in 1990 and had lost relevance.

For example, one of the coal blocks identified for auction to steel companies was a mine closed down by Coal India Limited and naturally did not evoke any interest from steel producers. Similarly, another coal block, which had earlier been thought to have potential reserves, had now undergone semi-urban development with a residential township built on it.

According to Coal Ministry information, around 40 companies in the steel and cement sectors had picked up bid documents for the planned auction of three coal blocks but none had followed up, leading to the cancellation of the auctions.

The three coal blocks had an estimated reserve of about 500-million tonnes.

The Coal Minister had also directed Ministry officials to fine-tune procedural aspects of the auction policy as previously several prospective bidders had pointed out a number of oversights which ultimately led to investors not participating in the auction.

For example, it has been pointed out that bid documents did not have any clarity on whether the end-use restrictions of the coal block would remain the same right through the life of the mine or whether the owner of the mine would have the right to change end-use midway, in keeping with any possible changes to the business plans of concerned steel or cement companies.

Prospective bidders had also pointed out discrepancies in estimates of coal reserves in various government bid documents. Steel and cement companies entitled to participate in the auction had sought the right to appoint independent mining engineering services and geological experts to carry out estimates of reserves of coal blocks and not rely entirely on government data.