Coal ministry rebuts charges of non-transparency in recent mine auctions

By Rajesh Malhotra

This refers to a story published in Firstpost where a question was raised over how transparent the coal auctions conducted by the NDA government were. The Ministry of Coal would like to rebut some of the points made.

 Coal ministry rebuts charges of non-transparency in recent mine auctions

Workers at a colliery. Reuters

The author of the piece does well to quote the Supreme Court judgement in the 2G and allocation of coal blocks cases. However, she wrongly calls these mining leases as permits and that the Supreme Court handed the (cancelled) coal blocks over to Coal India Limited (CIL). The September 2014 judgement of the Supreme Court did not hand over the cancelled blocks to CIL. In the operational part of the judgement, it only said, "The central government is confident, as submitted by the learned Attorney General, that the CIL can fill the void and take things forward."

The Delhi High Court has also noted that the process of the coal auctions were not "arbitrary or irrational". The high court, after going through the relevant records, observed in Sarda Energy and Minerals Ltd (SEML) Vs Union of India on 18 February 2015: "What has convinced us is the fact that the auction process has worked out well. We also find that apart from the empirical data of the auction process in respect of the 11 electronic auctions held so far, the process by itself does not appear to us to be arbitrary or irrational. There is, of course, no allegation that the auction process is designed to favour any particular bidder."

While this should be enough to put the matter at rest as all these issues were raised during hearings in court, we would still provide specific rebuttals to some points made in the piece.

The story says that the coal ministry took needless credit for its decision to auction the coal blocks since the MMRD Act was amended in 2010 itself, making auctions mandatory. The obvious question to ask is why did the earlier government not conduct any auction all these years? In fact the proposal for auction of mines was first mooted in 2004. It is to the credit of the ministry that not only did it deal with the fallout of the Supreme Court judgement in an effective manner but also auctioned the coal mines through a transparent process in record time.

The story fails to mention that bids were placed on an electronic platform accessible to everyone with an internet connection. In fact, most journalists were tracking the progress of the auction on their mobile phones. We had to augment our server capacity as lakhs were viewing the auctions. What could be more transparent?

The number and names of the companies which had applied were publically disclosed in open forums where hundreds of bidders were present along with several journalists too. The entire proceedings were videotaped. There were also press releases and names were disclosed on the auction website. Technical and financial parameters for the qualification of bidders were clearly laid down in the tender document, which is even today available in the public domain on the website. Grounds for disqualification were also clearly mentioned in the tender document.

Specific reasons were also given to such bidder (on decisions taken). The initial bid price (applicable floor price) and subsequent bids were also publically visible. The parameters for determining the floor price for each mine were part of the methodology and on public display on the website. Thus, each and every data point was actually available in the public domain.

The story also mentions Gare Palma IV/7. The mine’s reserves in 2012 were 156 million tonnes and in 2014 the figure was 67 million tonnes. It is natural for mines to have less reserves available after coal is extracted. The grade of coal of the mine was ‘G’ in 2012; it remained ‘G’ in 2014 and nor is it likely to change in the future. So it is not clear why the writer thought there was a problem here.

And if anyone felt that the block contained additional reserves and better grades of coal, it should have been SEML, which was operating the mine. It should then have bid the highest. The assumption in the story that the block contained additional reserves and better grade coal thus falls flat. It needs to be pointed out that SEML was not selling any coal to "sponge iron and cement firms" but was using it for captive use. Most bidders for the mine also visited the mine and satisfied themselves of these parameters.

One does not also know why the journalist concluded that 'Miral' was a lucrative block as there were only three technically qualified bidders for the block - one of the lowest. The bids were examined by a Technical Evaluation Committee chaired by the Vigilance Commissioner of the State.

It is worth pointing out that no bidder, including the ones who have challenged various terms and conditions associated with the auctions or who have been unsuccessful in winning a mine, has questioned the transparency and fairness of the process. On the other hand, it would not be proper to comment on the bids not accepted by the government as the matter is before court. The reasons for rejecting the bids was lack of fair value and not cartelisation.

The author is Director (Media & Communications), Ministries of Power, Coal and Renewable Energy.

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Updated Date: May 25, 2015 13:43:42 IST