Study Material | Test Series
Drishti IAS
call1800-121-6260 / 011-47532596
Drishti The Vision Foundation
(A unit of VDK Eduventures Pvt. Ltd.)
Ordinance for e-Auction of Cancelled Coal Mines
Oct 22, 2014

In a major move towards energy sector reforms, the central government recommended promulgation of an Ordinance to facilitate e-auction of coal blocks for private companies for captive use and allot mines directly to state and central PSUs. The move comes against the backdrop of the Supreme Court last month quashing allocation of 214 coal blocks to various companies since 1993.

State sector requirements including those of the Central and state governments would be met and coal mines would be allocated to PSUs like NTPC or state electricity boards. As far as the private sector is concerned, the actual users of coal in the cement, steel and power sectors who apply for a certain number of coal mines will be put in the pool and there would be an e-auction. A sufficient and adequate number of mines would be put so that actual users go back with the mines. The auction process would be transparent and completed in 3-4 months with proceeds going entirely to the state governments where the mines are located.

Coal worth US $20 billion which was being imported annually would be domestically substituted through this measure. The biggest beneficiaries would be the eastern states like Jharkhand, Odisha, West Bengal and Chhattisgarh. States like Madhya Pradesh, Maharashtra and Andhra Pradesh would also benefit. This will financially empower particularly the eastern states (which have most of the coal mines) and lakhs of labourers would get employment while bank capital held up with the allottee companies would be fruitfully utilized. The original Nationalisation Act will remain and Coal India Ltd will be fully protected.

Any convicted company will be debarred. There will be an enabling provision for the future where under rules which are framed for commercial users of mines could also be decided by the Central government. This would lead to an optimal utilisation of the natural resource. This process would not in any way impact the structure of Coal India. Coal India would continue to function as it is and all the mining requirements of CIL in present and future will be adequately protected.

CIL at present accounts for over 80 per cent of the domestic production. Private companies having end-use plants like steel, cement and power used to get mines through screening committee mechanism. The coal blocks were allocated by a screening committee mechanism. The matter was taken to the Supreme Court through a public interest litigation. The court quashed the entire allocation.

In the pproosed e-auction only companies incorporated in India would be allowed to participate in the bidding for which the reserve floor price will be determined by a committee and the auction will be sector-specific. There will be no right of first refusal and all bidders will have to compete in the e-auction through reverse bidding. All environmental concerns will be taken care of.


Helpline Number : 87501 87501
To Subscribe Newsletter and Get Updates.