Coal mine auction drill

New Delhi: The Narendra Modi-government will be putting up for auction a score of coal mines by June-end this year after tweaking some rules, besides starting work on the auctioning of around 288 iron ore and other mineral-bearing mines in the next financial year.

Top coal ministry officials said the coal auctions would be held by the end of June after incorporating changes in the way the previous auctions were held. The changes have been approved after an inter-ministry consultation.

"We have found that the interest in the five auctions held so far have been tepid. One auction round had to be cancelled altogether... so we are looking at redesigning the auction methodology, including suggestions such as working out a price index for bidding," said officials.

The government plans to sell half-a-dozen coal mines to steel makers and the rest to the makers of cement and sponge iron. The poor response to the earlier auction has prompted the government to tweak the rules to make the mines more lucrative for buyers.

"With steel coming out of an earlier depressed cycle as evidenced by the keen interest shown by bidders for sick steel mills, we feel the rule changes could induce better bidding for the mines," said officials.

The government also has plans to set up a coal regulator to oversee the sector and possibly indicate the pricing norms as well as act as an arbitrator between the coal players and the government.

However, the government is divided over whether the regulator should have the sole power of fixing prices or whether the pricing should be left to the market forces.

India has long been debating the setting up of an independent regulator as apart from monopoly producer Coal India, a large number of firms have been given captive blocks and some have been allowed to trade surplus production. Besides, there have been complaints of mis-pricing and the abuse of monopoly by CIL and counter complaints of being arm twisted by the government to favour private buyers.

The proposal to set up a regulator springs from the fact that coal mines are now being auctioned in a manner similar to telecom airwaves. A regulator is thus needed to arbitrate in disputes between the state and the miners as well as between rival miners instead of clogging up the courts with cases.

"If we need to have more coal on the table to satisfy demand, private sector participation through auctions to push production is a must," said officials.

Coal India Ltd