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The view from the ministry

India’s Ministry of Coal is responsible for running the auctions, and for supervising the activities of Coal India. Coaltrans Insider put its questions about the ministry’s progress to Anil Swarup, the ministry’s Secretary.

Coaltrans Insider (CI): What is the current status of, and timeline for, the fourth round coal auction?

Anil Swarup, Ministry of Coal (AS): The fourth round of auctions for coal mines shall be for industries engaged in the production of iron and steel, cement and those which consume captive power – these could include industries like aluminium and fertilizers. The process of digitization of the mine dossier comprising the geological report, the mine plan and status of approvals apart from other information is currently underway. An assessment of the intrinsic value to determine the floor price and upfront amount payable is also being done. It is expected that this process of preparation will conclude within the next two weeks.

CI: What were the priorities that the government brought to the design of the most recent rounds of auction?

AS: The primary objective of the Government as expressed in the design of the public auction was to ensure a truly transparent, objective, time bound and seamless process of auction. Two, to provide a level playing field for all companies by restricting the coal reserve bid to 150% of the requirement. This also prevented creation of oligopolies. Three, to ensure that power tariffs did not rise by adopting a system of reverse auctions and four, by clubbing together the end-uses the Government facilitated a competitive environment in the auctions.

CI: Are you confident that successful bidders can meet their obligations and government can cope with the fallout if any bidders cannot?

AS: While it is difficult to predict economic conditions over a long period of time, we are reasonably confident that the successful bidders shall meet their obligations. It may be mentioned that the Government has obtained performance guarantees of the amount equivalent to one years’ revenue of the coal extracted from the coal mine. In case of any default, the same can be encashed. In addition, efficiency parameters have been prescribed. Strict time lines have been incorporated in the Agreement for development and production of the mine.

CI: Do the balances between domestic supply and demand and international supply and demand support the current auction model?

AS: Auction model primarily brings about transparency in allocation of resources that are short in supply. However, over the next few years the supply will also get augmented.

CI: What role can and will seaborne coal play in India’s power and steel sectors?

AS: The imports of coking coal would need to continue in view of the fact that India is constrained due to lack of adequate coking coal resources of desired quality. However, the envisaged increase in domestic production in next 3 to 5 years would significantly reduce the imports of thermal coal.

CI: Will Coal India be able to meet its targets for increases in its output?

AS: Every effort is being made for realizing the projected targets by the subsidiary coal companies of CIL. A detailed plan has been put in place identifying mine-wise action in order to reach the envisaged targets. A rigorous monitoring mechanism has also been put in place by opening a coal project monitoring portal (CPMP) through which the pending issues are being addressed by the Ministry with the concerned Central Government ministries as well as concerned State Govts.

CI: Will large-scale improvements in importation and transport infrastructure be required to deal with these increases?

AS: The envisaged enhancement of domestic production is directly linked with establishing matching evacuation infrastructure. The three critical rail lines covering the three potential coalfields which would contribute a significant portion of the envisaged production are already under construction and are envisaged to be operational during the period between June 2016 and December 2017. Other evacuation railway lines have also been identified and will be constructed through joint ventures that have already been set up in the States of Chhattisgarh, Jharkhand and Odisha.

Learn more about India's revised set of auctions at the 15th Coaltrans India on 2 - 4 March at the Grand Hyatt Goa.

This content is provided by Coaltrans Conferences for informational purposes only, and it reflects the market and industry conditions and presenter’s opinions and affiliations available at the time of the presentation.

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