Displaying items by tag: coal block
India begins coal block allocation process
27 January 2015India: The Coal Ministry has begun the process of allotment of mines to central and state public sector units, starting with the allotment of 36 coal blocks.
The Supreme Court had in September 2014 scrapped all but four of 218 coal blocks allocated by the government over the past two decades, in a tougher-than-expected ruling that sank shares of companies that have invested heavily in projects around the concessions. Most power, steel and cement companies that won blocks have until end-March to return them and the government then plans to auction them off. The previous practice of selective allocation was ruled illegal and arbitrary by the court.
Coal secretary Anil Swarup said that the ministry has started the process of coal allocation. "Today, we are issuing a notification for the allotment of 36 coal blocks. More mines will be added subsequently depending on the requirement. It will depend on the request we receive from state entities or the public sector undertakings in terms of allocation of coal blocks," said Swarup. He added that the ministry would issue guidelines for the coal blocks and those firms that already have coal linkages will have to surrender them. Once the linkages are surrendered then more coal will be made available to state-owned Coal India Limited. Coal India accounts for about 80% of the country's total output. Coal fuels 60% of the country's power production.
"Out of 101 mines, we are looking at 98 mines, as the coal ministry has examined them and it was discovered that there were three blocks in a 'No Go' area. Out of 98 mines, 36 blocks are going for allocation. 42 mines are auctioned, 23 blocks are in schedule II and 23 blocks are in schedule III. The remaining 16 will be auctioned in the future," said Swarup. Around 167 bidders have requested to visit the coal block site.
Coal India plans to engage an external consultant to examine various structures and implementation models to auction the coal linkages. The consultant would examine various structures and implementations models for the auction of coal linkages / LoAs (Letter of Assurances) or other such market-based mechanisms and to recommend the optimal structure that would meet the requirements of all the stakeholders.
Indian coal block auctions to start without regulator
04 November 2014India: The Indian government plans to hasten the coal block reallocation to the private sector through auctions, although the new Coal Mines (Special Provisions) Ordinance skips the issue of a regulator. According to government officials, 74 producing blocks would be put up for online auction by December 2014 and a regulator will not be not required.
"The coal blocks, which would be put for e-auction, are all for end-usage in power, cement and iron production," said a government official. "It's the commercial mining by private companies that needs to be put under vigilance and that would be done later after the first batch of auction commences."
Valuation of coal reserves and assets in the 74 blocks will be done by a committee under Pratyush Sinha, former chief vigilance commissioner. The transparent auction process in December 2014 will start with a pool of 42 operational and 32 nearing-production mines.
Through the ordinance, the government has added enabling provisions in the Coal Mines (Nationalisation) (CMN) Act, 1973 and the Mines and Minerals (Development and Regulation) Act, 1957, to allow commercial mining in the country.
"The priority is to make available coal to the sectors in want of fuel. Undoubtedly, once the sector opens up, a regulator would be needed. The powers and constitution of the regulatory body is yet to be dwelt upon and it would be for the non-operational cancelled coal blocks," said a government official.
All the coal board’s men…
01 October 2014Energy costs for cement producers in India are set for volatility following the Supreme Court's decision this week to cancel the vast majority of allocated coal blocks. After ruling that the allocation process by the Indian government was illegal and arbitrary the court stopped 214 out of 218 coal blocks. The affected operators working on the blocks have six months until 31 March 2015 to wind down production. At this point the government intends to auction off the blocks.
The background to this decision lies in the so-called coal allocation scam or 'Coalgate.' Over 80% of coal in India is produced by the state owned company Coal India. Since 1993 though the Indian government has been allocating coal blocks or leases to mine coal for captive use by industries such as cement, steel and power generation.
However, the allocation process was accused of lacking transparency compared to an open bidding process. The Comptroller and Auditor General of India estimated the loss to the government was an incredible US$30bn. The allocation process received further scrutiny as Indian coal imports rose leading to accusations of inefficiency on the Coal India side and corruption on the coal block side. Meanwhile, major power cuts such as those in the summer of 2012 focused both domestic and industrial users' minds on the state of the country's coal industry.
Following the power cuts in 2012, an inter-ministerial panel recommended the de-allocation of two coal blocks held by five companies, including Gujarat Ambuja Cement, Grasim Industries and Lafarge India.
India's coal imports started to increase rapidly around 2009 with an annual growth rate of around 5% and a demand growth of 25% from 2009 – 2014. The majority of its imported coal comes from Indonesia, Australia and South Africa. In 2012 its coal imports were over 150Mt.
With Indian cement producers facing production overcapacity and falling profit margins in recent years, any disruption to input costs such as power is bad news. The growing import rates point to an increasing supply-demand mismatch. A more open process for the allocation of India's vast coal reserves should be good news for industrial users in the medium to long term. However, in the meantime they may face a jolt.