Moving a step closer towards transparency and clarity, the Coal Ministry has invited the comments of coal producing States on rules for auction of assets through competitive bidding. Allocation of coal blocks to companies for specified end use other than power generation shall be done through competitive bidding, in which even government firms can participate.

The Ministry has engaged a professional consultant to frame exhaustive guidelines for ensuring transparency in allocation of natural resources. Competitive bidding, for which the government has already identified 54 coal blocks, is likely to take off only early next year.

According to the new draft rules, coal/lignite blocks for generation of power will be allocated on tariff-based competitive bidding. “There shall be no bidding for coal blocks meant for power separately.” The blocks identified for the power sector will be further earmarked to the Power Ministry/State governments for carrying out tariff-based bidding. In addition, “allotment of coal blocks will be made to state mining/mineral development corporations for commercial mining for supply to consumers in the State on a fuel supply agreement/coal linkage basis.’’

A separate rule has been framed on allocation of coal areas to government companies for mining. Their applications shall contain particulars of the requirements of the State, existing linkages and coal areas already allocated. There should also be details of development and capability of the firms— financial as well as technical — and the status of coal area already allotted to them or to the State undertakings .

The Coal Ministry will constitute a committee, which will vet all applications and submit its recommendations.

The rules further say coal produced from the blocks will be distributed on long-term contracts/linkages to specified end-users on the lines of linkages granted by the Standing Linkage Committee under the Ministry. The criteria could include the preparedness of the project, the financial capability of the project proponent, and preliminary availability of land, water, etc. These criteria are only illustrative and the State government may decide on a detailed transparency mechanism.

In case coal from the blocks is supplied to power plants, they will have to enter into long-term power purchase agreements with distribution companies (Discoms) and also as per the policy guidelines issued by the Power Ministry.

The allottee company shall file annual returns on distribution of coal with the Coal Controller and pay the reserve price as specified in the allocation letter/agreement. In case, the mine is developed through a mine developer and operator (MDO), the selection of the MDO will be done through competitive bidding. The allottee company shall ensure that the bidding criteria for engagement of the MDO are not linked to the notified Coal India price.