Photo by: Reuters
KOLKATA (miningweekly.com) - India’s maiden auction of coal blocks was launched over the weekend amidst aggressive bidding by user industries.
The weekend saw five coal blocks put up for auction in the first phase of allocating coal block resources through competitive bids. The blocks were offered to two user segments; one where end-use prices are unregulated, like steel, cement and aluminium companies, and the second where prices are regulated, like thermal power producers.
On Sunday, aluminium producer Hindalco Industries of the Aditya Birla group bagged the 29-million-tonne Kathautia coal block in the eastern Indian province of Jharkhand, putting in a successful bid of Rs 2 860/t ($46/t) of coal, which several analysts considered to be an aggressive bid.
Hindalco beat Monnet Ispat, Rungta Mines and SS Natural Resources at the competitive bidding to secure the Kathautia coal block.
On Saturday, Reliance Cements Company Limited secured the six-million-tonne Sial coal block in the central Indian province of Madhya Pradesh with a bid of Rs 1 402/t ($22.60/t).
The Belgaon coal block, in the western province of Maharasthra, was won by Sunflag Iron and Steel Company Limited, with a bid of Rs 1 785/t ($27.80/t) of coal.
All three blocks were secured through normal auctions by companies in unregulated sectors, like aluminium in the case of Hindalco, cement in the case of Reliance and steel for Sunflag, whereas the reverse auction route, where the lowest bidder wins, had been adopted for allocation of coal blocks to thermal power producers to limit the impact of the high cost of fuel acquisition on the final tariff of electricity generated.
In the power sector, Kolkata-headquartered CESC Limited won the Sarisatolli coal block inthe eastern Indian province of West Bengal, with a winning bid of Rs 470/t ($7.50/t). The thermal power producer and utility company had already been mining the block until it was withdrawn along with 204 other coal blocks on the order of the Supreme Court, last year.
The GMR group, was successful in winning the Talibara-I coal block reserved for the power sector with a bid of Rs 478/t ($7.70/t) of coal.
However, none of the winning companies were willing to comment on the impact of their bids on the cost of production on the grounds that legal formalities for handing over the assets were yet to be completed.
In the first phase, 134 companies out of 176 qualified to bid for 21 coal blocks that were already in production, but had been withdrawn following the Supreme Court order which last year declared 204 coal blocks illegally allocated. This had forced the government to adopt the auction route for the allocation of coal blocks, replacing the earlier ‘nomination’ route based on application by companies and the discretion of a government appointed committee.