NEW DELHI: The Union Cabinet on Wednesday approved the auction methodology for commercial mining and sale of coal by private companies on a revenue sharing model. The decision, which was taken during the meeting of the Cabinet Committee on Economic Affairs (CCEA) under the chairmanship of Prime Minister Narendra Modi, allows ease of eligibility criteria for bidders and performance-linked incentives to boost coal production, as government tries to lift up investor sentiments.
The new methodology for coal mine auctions will entail reduced upfront payment, and the bidders will be required to bid for a percentage share of revenue payable to the government.
“The floor price shall be 4 per cent of the revenue share. Bids would be accepted in multiples of 0.5 per cent of the revenue share till the percentage of revenue share is up to 10 per cent; and thereafter, the bids would be accepted in multiples of 0.25 per cent of the revenue share. There will be a 50 per cent rebate to the mine owner in the revenue share they pay to the state, in case of early production,” the coal ministry said in a statement.
Nearly 50 coal blocks, including a few large mines, are expected to be put out for auction under phase-1.
The upper ceiling for upfront amount has been fixed at Rs 500 crore for mines with reserves above 200 million tonne and Rs 100 crore for up to 200 million tonne reserves.
“This methodology is oriented to make maximum coal available in the market at the earliest and enable adequate competition, which will allow discovery of market prices for the blocks and faster development of coal blocks. Higher investment will create direct and indirect employment in coal bearing areas, especially in the mining sector, and will have an impact on economic development of these regions,” the coal ministry explained.