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Union cabinet clears ordinance to clean and open up coal mining.

In order to clean coal mess, government is planning to bring an ordinance to allow e-auction of the cancelled coal blocks. The Union Cabinet on 20th October 2014 recommended the promulgation of an Ordinance to acquire the land of those 214 coal blocks mines the allocations of which the Supreme Court had last month quashed. It also approved a plan for

e-auctioning the cancelled blocks to end-user private players of coal from the power, steel and cement sectors.

The ordinance has been drafted by the Coal Ministry after extensive consultations with Attorney General Mukul Rohatgi.

The Key provisions of the Ordinance are:

  • Private sector firms will be allowed to bid for coal blocks. The successful bidders in the e-auction would be mandated to pay the earlier allottee the cost of the land and the investments that went into the end-use plant.
  • There would be no right of first refusal and all bidders would have to compete in the e-auction through reverse bidding. No right of refusal means, earlier coal block holder whose coal block has been cancelled, will not be given first opportunity to bid again for that same block. Coal block holder will have to bid along with the rest of the bidders. Under reverse bidding, buyers puts up a request to buy a good or service, and sellers places a bid offering a cost of that good or service, he is willing to sell at. Buyer chooses the seller with the lowest cost of the goods or service.
  • In the first round of e-auctions to be completed within the next three to four months only end-users will be eligible for bidding for captive mines i.e. companies operating power generation plants, iron and steel plants and cement plants will be allowed to participate in e-auction.
  • Trading in coal will be barred and thus private players will not be entertained for commercial mining for now. However, responding to a query on whether the Coal Mines Nationalisation Act, 1973 would be amended to allow commercial mining, Coal and Power Minister Piyush Goyal said an enabling provision for future commercial use of mines would form part of the amendment.
  • Companies that lost mines can bid again, unless convicted for malpractices. Only foreign companies incorporated in India would be allowed to participate in the bidding for which the reserve floor price would be determined by a committee.
  • Blocks will be reserved and allotted as per need to state and central PSUs like NTPC and State Electricity Boards.
  • Authority will be setup to decide price of land and machinery in the existing mines.
  • All the proceeds of the auction will go to states. The biggest beneficiaries would be the eastern states like Jharkhand, Orissa, West Bengal and Chhattisgarh, while states like Madhya Pradesh, Maharashtra and Andhra Pradesh would also benefit. “This will financially empower the eastern states particularly (as they have most of the mines) and lakhs of labourers would get employment while bank capital held up with the allottee companies would be fruitfully utilized”, said Finance Minister Arun Jaitly.

Despite being coal-surplus India was annually importing coal worth $20 billion. The ordinance will help replace this imported coal through increased domestic coal production.

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