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First ever coal block auction approved by Indian government

World Coal,

The Indian cabinet has approved the auction of coal blocks to private companies, Coal Minister Sriprakash Jaiswal said on Tuesday, enabling the government to allot coal mining licences through competitive bidding for the first time.

The Cabinet Committee on Economic Affairs (CCEA) has approved a policy that will allow private companies to bid for mining licences. The government hopes that this new system of competitive bidding will bring in more companies with the capital and expertise needed to increase coal exploration and production.

Quick and transparent process

The beginning of auctions to establish which private companies will gain the right to mine for coal will speed up the coal-deposit development process and make it more transparent, continued Mr. Jaiswal. The successful bidder will be granted two years for exploration and five years for block development.

Previously, India has allotted coal-mining licenses based on bureaucratic recommendations, a method that has been criticised for apparently depriving the government of close to US$ 30 billion of potential revenue between 2004 and 2011. The new methodology “provides for production-linked payment on rupee per tonne basis, plus a basic upfront payment of 10% of the intrinsic value of the coal block”, explained the government.

The first auction will consist of four coal blocks with total estimated reserves of 2 billion t of coal, enough to generate about 10 GW of power. Separately, the CCEA also approved a strategy allowing NOCs to carry out the “exploration and exploitation of unconventional hydro-carbon resources particularly shale gas and oil in their already awarded onland Petroleum Exploration License/Petroleum Mining Lease (PEL/PML) acreages under the nomination regime”.

Edited from various sources by Katie Woodward

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