Coal Play

Commercial mining auction Tranche 2 elicits a tepid response

The second tranche of the coal mining auction held in August 2021, under the commercial coal mining policy, got a tepid response with only eight blocks being successfully auctioned out of 67 on offer. This is the highest number of mines to go under the hammer in a particular tranche. The auction process was launched on March 25, 2021 under the 12th tranche of auction under the Coal Mines (Special Provisions) (CMSP) Act, 2015 and the second tranche of auction under the Mines and Minerals (Development and Regulation) (MMDR) Act, 1957. The mines on offer had a peak rated capacity (PRCs) of about 150 million tonnes (mt) and spread across six states – Chhattisgarh, Jharkhand, Odisha, Madhya Pradesh, Maharashtra and Andhra Pradesh. Of the total blocks, 37 are fully explored while the remaining 30 are partially or regionally explored.

Auction process

From this tranche onwards, the government has adopted a rolling auction mechanism for conducting auctions. Earlier, blocks were allocated on payment of fixed amounts per tonne that had turned away private investors. Coal is the first mineral resource where the rolling auction mechanism is being implemented. The auction was held online through a transparent two-stage process. The auction process used a market-linked mechanism wherein bidding was based on the percentage revenue share over the reserve price. Further, the process was linked with national coal index payments, offered ease in participation with no requirement of prior coal mining experience, optimised payment structures, and had flexible operating terms. The  e-auction was conducted for qualified bidders during August 2 to 4, 2021.

Results

The second tranche of the commercial coal mine auction started off well with over 50 mine-specific tender documents being purchased by bidders. However, bids were received for only 19 coal mines out of the 67 blocks offered. As many as 20 companies cumulatively placed 34 bids for commercial coal mining. Most of the bidders were from the iron and steel industry. The Burakhap Small Patch coal mine in Jharkhand received five bids, the highest among all mines, followed by the Rauta mine in the same state, which received four bids.

Resultantly, the coal ministry put 19 mines up for auction, of which 10 were fully explored and nine were partially explored. Of these 19, only eight mines have been successfully auctioned so far, four explored and four partially explored. The Adani Group entities have won three mines. The other winners are given in the Table.

Conclusion

The commercial coal mining auctions are an important step towards increasing the availability of coal and reducing coal imports. However, the dismal response to the latest round is likely because several unexplored mines were put up for bidding and lengthy exploration activities will have to be conducted by bidders. Also, given the challenges in land acquisition and delays in environmental approvals along with the decline in financiers’ appetite to fund “climate-unfriendly” projects, the future of coal mining is, at best, uncertain.

 

 

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