Coal ministry may give CIL, states 4 cancelled blocks

NEW DELHI: The coal ministry is considering the option of either allotting the four coal blocks — the winning bids for which were rejected on Friday as undervalued — either to state-run Coal India Ltd (CIL) permanently or hand them over to states that have sought more mines.
“Rebidding is not feasible at this point, given the short time left (the Supreme Court has given a March 31 deadline for halting production if the mines are not re-allotted through auction).For the time being, the mines will remain with Coal India,” a senior ministry official said on Saturday requesting anonymity. The final decision is likely by Sunday.
On March 17, TOI broke the news about impending cancellation of Jindal Steel and Power Ltd’s (JSPL) bids. Its bids for three blocks and Balco’s offer for one have been rejected. Bids of Jindal Power, Hindalco, Tirumala Industries, Jaypee Cement and Usha Martin for five other ready-to-produce blocks were accepted. Bids for these nine mines, among 34 auctioned in the first two rounds, came under scrutiny for not reflecting fair value.
The sources said coal and power minister Piyush Goyal asked the officials to examine the bids “dispassionately for what is best for the country” to decide on the offers. Since two of the blocks are producing coals, there is an urgency to ensure continuity. “It looks like there is no option but to give them to Coal India and the remaining two to states or their entities,” another official in the know said.
The official rejected industry’s contention of revenue loss if the mines are allotted to Coal India or state government. “The basic tenet of the Supreme Court judgement (on cancellation of coal block allotments) is that benefit (natural resources) should flow to the people. If the mines remain with Coal India, benefit remains with the government, ultimately the people. If these are given to states, again the benefit is vested in people,” the official said.

While several states have sought coal blocks, the ministry has received 107 applications from Central and state PSUs for allocation of 43 mines earmarked for government companies.
In a statement on Saturday, Jindal Steel and Power expressed surprise at the ministry’s decision, saying the company “followed a consistent and prudent bidding strategy throughout the auction process, with a serious long-term business perspective… We are puzzled with the decision and would make our best efforts to engage in a dialogue with the coal ministry and government authorities to present the facts.”
Coal-bearing states were projected to garner over Rs 2 lakh crore, including royalty, from the auction of 34 mines following the Supreme Court last year cancelling allotment of 204 blocks.

There is already a view emerging within industry that some of the winning coal block bids might be unsustainable. The government's objective has clearly been profit maximization and the Rs 2 lakh crore auction haul is testimony to its success on that count. But is it over-reaching, and unfairly at that? It's the government that set the reserve price after taking various factors into account. If the winning bids are higher than the reserve price, why are they now being rejected? The government claims that it has circumstantial evidence of collusion and carterlization among the bidders. But proving it won't be easy, unless there is rock-solid evidence. This looks more like the government is shifting the goal post retrospectively. It's unlikely to foster confidence in business.