The coal auction has been an astounding success so far in terms of filling up the Government’s coffers and justifying the former Comptroller and Auditor General Vinod Rai’s assessment that the policy followed by the UPA Government for allotment of the coal blocks led to nearly Rs1,86,000 crore of profit to the coal companies who exploited loopholes and indulged in irregularities to bag the lucrative contracts.
As against the conservative estimate of the Government that the auction of the initial lot of 18 coal blocks could fetch around Rs50,000 crores, four days into the auctions the offers have already crossed Rs60,000 crores for 13 mines alone.
On Thursday, Jindal Power ltd bagged two coal mines in Chhattisgarh for an estimated Rs1,679 crore, while the Aditya Birla Group’s firm Hindalco Industries won a block there for an estimated Rs14,858.9 crores, taking the total number of mines won by the companies so far to 15.
Coal Secretary Anil Swarup tweeted, “Gare Palma 4/2&3 goes at 108”. Sources said it has been won by Jindal Power. The first phase of the auction will last till February 22.
The second round of auctions will start from February 25 and continue till March 5 for 43 blocks. A total of 204 blocks are to be auctioned over the next few years.
Interestingly, majority of the bids are way above the benchmark price of State-run Coal India. For example, OCl’s bid of Rs2,302 per ton for the mine it won is 50 per cent more than Coal India’s average price for that grade of coal.
The aggressive bidding by mining, metal and power companies showed they were counting on revival of the economy and increasing demand in days to come. It has also surprised officials of the Coal Ministry, though they rule out any increase in power tariff due to aggressive bidding by the power generation companies. In the run up to the auction, the Government had said there would be a cap on power tariff , which would prevent the companies from passing the burden of the bidding on to consumers.
Talking to a TV channel, Coal Secretary Anil Swarup said it was not the Government’s responsibility to tell the bidding companies what they should be doing.
“I am hoping that the people who are bidding are doing so with their eyes wide open, which I am sure they are,” Swarup told CNBC-TV18 channel, adding: “They must be having good reasons for bidding what they are.”
He made it clear that consequences, if any, of irrational bidding would have to be borne by the companies themselves. “I don’t force them to bid in a particular manner. They have to bid for things in a manner that is viable to them. It is their call, they are taking the call,” Swarup said. He said that around 80 blocks will be auctioned by March 31, and that prices would cool as more blocks come up for auction.
Reacting to the encouraging response to the auction, Commerce and Industry Minister Nirmala Sitharaman said on Thursday: “Certainly the CAG’s position has been vindicated but I am underlining the larger issue here...Our position has been vindicated.”
The present Government led by Prime Minister Narendra Modi switched to auctioning the coal blocks after the Supreme Court cancelled allocation of 204 mines in September last year.
Sitharaman added: “The last CAG report (in 2012) on the coal block allocation was unfortunately unnecessarily criticised but today the figures and the way in which the coal block allocation has been designed by this Government, in such a transparent manner has shown two things. The institutions (like CAG) of this country are doing their best and all of us will have to respect the way in which these institutions are doing their job and any attempt to undermine or ridicule them is not going to do good for this country. Plus, the natural resources of this country, if carefully without hurting anybody, are distributed in a transparent and open way, it results in revenue that helps this country.”