Coal linkages to steel, aluminium, cement sectors only via auction

Move for transparency & level-playing field; follows SC declaring allocation of 204 coal mines/blocks as illegal due to arbitrary procedure

The government is considering auctioning coal linkages of around 24 million tonnes in the first year.

Coal linkages to non-regulated sectors such as steel/sponge iron, cement and aluminium will be provided only through auctions.

This was decided on Wednesday by the Cabinet Committee on Economic Affairs (CCEA) which met under Prime Minister Narendra Modi.

The auction of coal linkages will be transparent and creates a level-playing field, Coal and Power Minister Piyush Goyal said.

The auction ensures all market participants have a fair chance to secure the coal linkage, irrespective of their size. It attempts to ensure an optimal allocation of coal across user industries and geographies, he said.

Coal Secretary Anil Swarup said: “the exercise (for auction) will start in seven-ten days. It should take two-three months as happens in an auction to finalise that. Let us put it about April-end, we should be able to put it in operation.”

Mr. Goyal said the process of giving coal linkages was not entirely transparent as there were several complaints. The government is considering auctioning coal linkages of around 24 million tonnes in the first year.

As per the CCEA decision, all allocations of linkages/Letter of Assurance (LoAs) for non-regulated sector (but excluding fertilizer (urea) sector), including their captive power plants, shall from now on be auction-based. State-owned Coal India Ltd (CIL) and Singareni Collieries (SCCL) will put up 25 per cent of their incremental production during 2015-16 over 2014-15 for auction, according to an official statement. The Supreme Court in August and September 2014 had declared 204 coal mines/blocks allocated since 1993 as illegal on the grounds that the procedure followed was arbitrary. Pursuant to this judgment, e-auction of Schedule II and Schedule III Coal Mines was conducted. The same philosophy of non-discretionary allocation is being extended for the coal linkages as well. This would require CIL to allocate linkages through a market-based mechanism.

The union cabinet allowed the railways ministry to form joint venture (JV) companies with the state governments to mobilize resources for undertaking various rail infrastructure projects in states. The JV can also form project-specific SPVs with equity holding by other shareholders like banks, ports, public sector undertakings, mining companies etc.

The JV exercise would ensure greater participation of states in implementation of railway projects in terms of financial participation and decision-making process. This will facilitate in faster statutory approvals and land acquisition. Besides transporting people, various cement, steel and power plants would get the necessary rail link for transportation of their raw material and finished products.