MARKET UPDATE
| Govt to charge Coal India for block allocation Wed, 03 Oct 2012 00:46:00 +0530 |
| Business Standard Economy Policy News There may be no going back on bidding for coal blocks by the government, but a new policy would put a price on mining rights for even government-controlled Coal India Ltd (CIL). The coal ministry has decided to charge CIL a “reserve price” for the 116 coal blocks allotted to the state-owned miner. “We are going to ask CIL to pay a reserve price for all the 116 blocks allocated to the company last month. No reserves would be allocated for free now,” a senior coal ministry official told Business Standard. The decision would raise the price of coal sold by CIL. The official also said the reserve price for CIL would depend on the average grade or quality of coal in the block, the location of the acreage and the accessibility of the mining lease. The details of how the reserve price for coal blocks would be calculated and the quantum of the outgo for the world’s largest coal miner are yet to be worked out. In the wake of the political storm over the alleged coal block allocation scam, this would be the second landmark move by the United Progressive Alliance government aimed at correcting the policy imperfections in the sector. The first, the ‘course-correction’ move, was aimed at making it mandatory for captive mining companies to participate in tariff-based bidding for power projects. The new dispensation for coal blocks would be different from the government’s policy in the oil and gas sector, where state-owned companies are considered on a par with private ones during bidding for oil and gas blocks under the New Exploration and Licensing Policy (Nelp). Under Nelp, companies are not charged an upfront payment, but they have to share a portion of production with the government, after recovering costs. In August 2008, CIL had requested the ministry for allocation of 138 coal blocks with 57.5 billion tonnes of reserves so that its subsidiaries met long-term supply commitments. In August 2011, the ministry had asked the Central Mine Planning and Design Institute (CMPDI) to include more blocks on the list. After a study, CMPDI included eight more blocks, taking the count to 146 blocks. In September 2011, CIL sought allocation of 116 of these to its subsidiaries. The remaining 30 could be used for non-CIL mining, it stated. The ministry had allocated the 116 blocks to CIL; most of these blocks are yet to be explored. Also, 27 of these are in ‘no-go’ zones. |
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