After emerging as the winning bidder for 2 coal mines in the recently held auctions, JSPl is confident that the Government will respect the outcome of its own process by awarding the Gare Palma IV/2 & IV/3 and Tara coal blocks earmarked for the power sector. “The clinical efficiency with which the auctions have been held in an open transparent and flawless way is commendable,” said JSPl MD & Group CEO Ravi Uppal said.
“We went ahead with a consistent and prudent bidding strategy during the coal block auctions. We quoted a price which we think is the best we can pay based on business pragmatism,” Uppal added. Explaining the total cost per tonne of coal in the reverse auction process Uppal said, “We have always taken prudent decisions duly evaluating the long term outlook across all spheres of our business operations. In case of Gare Palma IV/2 & IV/3 blocks, the effective bid price is Rs808 per tonne, as we have foregone the mining cost of Rs700 per tonne and paid a premium of Rs108 per tonne to the government. Additional outgoes like royalty, taxes and cess will further increase the cost by around Rs500 per tonne”.
The ceiling price for Gare Palma IV/2 & IV/3 was set at Rs700 per tonne. The applicable ceiling price for the second and final stage of e-auction was zero based on the lowest quoted price in the Initial Price Offer (Stage 1). This in effect means that a discount of Rs700 per tonne was already given for the mining cost before moving to the forward auction. An additional premium of Rs108 per tonne was arrived at in the forward auction, taking the total cost to Rs808 per tonne. After factoring in royalty, taxes and cess the outgo will increase further. Similarly for the Tara coal block where the ceiling price was set at Rs970 per tonne, the additional premium of Rs126 per tonne being paid to the Government takes the effective bid amount to Rs1096 per tonne.
According to Ravi Uppal the reasons for difference in prices and interest in coal blocks is due to the difference in characteristic of each mine. The key factors that determine participating bidders would have had to consider while placing their bids included (i) size of the mine, (ii) status of the mine - operational or ready to produce, (iii) Gross Calorific Value (GCV) of coal reserves, (iv) distance of mine from end use plant and (v) nature of mine - open cast or underground.
Mr. Uppal further added that while developing the Gare Palma coal blocks JSPl had to set up the entire infrastructure. A pipe conveyor transports coal from Gare Palma mines to Jindal Power’s mega power plant in Tamnar. On an average, 20,000 tonnes of coal is mined and transported to the power unit everyday. For any other bidder, one of the biggest considerations would have been logistics of transporting coal to their plants which would require movement of 1000 trucks to and fro on a daily basis.
Similarly in case of a smaller operational mines, a particular bidder may bid aggressively to meet its coal requirements in near future. In case of large mines where serious bidders with a long-term outlook participate would see prudent bidding. So much so, there were mines which could not even garner interest from minimum number of bidders and had to be withdrawn from auctions. In the power sector, Durgapur II Taraimar and Durgapur II Saraiya were withdrawn after the IPO. likewise Dongri Tal II, Parbatpur etc were withdrawn from the unregulated sector.