Cabinet may decide coal auction floor price on Wednesday

New Delhi: The cabinet may on Wednesday decide to fix a floor price of Rs 150/tonne for auction of coal blocks in March.

A methodology for fixing floor and reserve price for the auction of 204 coal mines whose allocation was cancelled by the Supreme Court in September, will be decided at the cabinet meeting, sources said.[caption id=“attachment_109535” align=“alignleft” width=“380”]  Coal blocks. Getty Images[/caption]

“The proposal will streamline the procedure of auction and allotment of coal mines in a manner that will benefit the economy as a whole and promote optimum utilisation of coal resources consistent with the requirement of the country in national interest,” sources said.

As per the proposed methodology for fixing floor price for auction to steel, sponge iron and captive power," the intrinsic value of the coal block will be calculated by computing its net present value (NPV) based on discounted cash flow (DCF) method. The 10 percent of this intrinsic value will tabled upfront," sources said.

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It is proposed that the floor price will not be below Rs 150 per tonne as compared to minimum reserve price of Rs 100
per tonne for the power sector.

For government companies in the power sector, a fixed reserved price of Rs 100 per tonne of coal shall be payable as per the actual production by the successful allottee.

The methodology will be fixed and the mines would auctioned or allotted under the Coal Mines (Special Provisions) Ordinance, 2014.

The development follows the government announcing plans to allot or auction 92 mines to specific end-users in the first phase of bidding on 11 February.

Floor price is the minimum price to be set for a coal block that will be auctioned by competitive bidding for specified end users.

Reserve price means the rate fixed in rupee per tonne for a coal block which is to be allotted other than auction process.

“In the earlier methodology it was proposed to allot coal blocks only to power projects to be set up in future through tariff-based bidding or for the power project of government companies,” sources said.

The government has already made it clear that 74 coal mines out of 92, which the government plans to auction to specific end-users in the first phase of bidding on 11 February, will not require any green clearances.

These 74 blocks include 42 mines, which are already into production and another 32 which are ready for production.

These blocks have a potential to produce 210 million tonnes of coal.

The apex court in September had quashed allocation of 204 mines terming their allotment as “arbitrary and illegal”.

PTI