Government relaxes captive coal policy norms to attract bidders

In a bid to make the auction of coal mines attractive for power, cement and steel producers, the Union Cabinet on Tuesday allowed captive coal block allottee the flexibility to sell 25 per cent of the output in the open market on payment of additional premium.

The decision was taken at a meeting of the Cabinet Committee on Economic Affairs (CCEA), chaired by Prime Minister Narendra Modi.

Under the changed norms, the government has also given flexibility to the prospective bidders/ allottees of coal mines to use the fuel for all or any specified end use (cement, steel, power) rather than limiting it to only one end use.

Finance Minister Arun Jaitley said the new captive coal mine allocation policy will also allow companies to sell unsold portion of the fuel (out of the 25 per cent) to Coal India Ltd (CIL) at a discount of 15 per cent over the notified price for a grade.

In case of auctions, the successful bidder shall be required to pay an additional premium of 15 per cent of its final bid price on per tonne basis, for the actual quantity of coal sold in open market. The additional premium will be over and above the final bid price.

"This methodology aims to address the issue of lack of response from the bidders during the earlier tranches of auction/ allotment under the Coal Mines (Special Provisions) Act, 2015. The methodology will give certain flexibility to allottee in cases of change in economic situation, business cycle, End Use Plant requirement etc.," a government statement said.

"It is expected to make the on-going and future tranches of auction and allotment attractive and commercially viable and may increase the competition in the auction process," the statement added.

As per existing conditions, any coal which is extracted in excess of the requirement of the bidder in terms of conditions of tender document is required to be supplied to CIL at the CIL notified price less 15 per cent of such price, to take care of CIL handling expenses with respect to such coal. Also, such sale should not exceed 50 per cent of the annual coal production from the mine.