Coal Ministry shelves plans to auction of coal blocks in near future

Since the actual growth of power generation has been only 4 percent, there has been a situation of excess production in the country.

Published: 28th September 2016 03:27 PM  |   Last Updated: 28th September 2016 03:28 PM   |  A+A-

Coal Field_Reuters

An open cast coal field at Dhanbad district in the eastern Indian state of Jharkhand. (File Photo | Reuters)

NEW DELHI: With coal production hitting all time high and demands remaining feeble, the government has decided to shelve plans of auctioning of coal blocks in the near future.

Senior officials in the Coal Ministry said, “At present, the situation is not right for auctioning of coal blocks. Since there were very limited takers during the previous round of auction, therefore, we have shelved it for a while. We will wait till the market conditions become conducive for auctions.”

In its efforts to fuel the rapid expansion for generating power, the government had set a massive target of producing one billion tonnes of coal by 2020. This was estimated keeping in mind, the demand for power generation of the fuel at a level of 8-9 percent annual growth. But since the actual growth of the power generation has been only 4 percent, there has been a situation of excess production in the country.

Coal Secretary Anil Swarup had said that, currently, all power plants are ample quantities of coal. Even, more than 20 million tonnes of coal has started coming out from 13 of the 29 mines auctioned so far. By March 31, the rest of the mines would also start producing.

Debasish Mishra, partner-consulting, Deloitte Touche Tohmatsu India said, “The demand from power generation companies is not keeping up pace with the increase in coal production."

The government has so far allocated 75 coal mines for specified end use, including 31 through auction and 44 through allotment to public sector units. Piyush Goyal, minister of coal, power and mines had earlier said that the government expects to earn revenue of these mines to the tune of around Rs 3.53 lakh crore during the life of mines.

The country’s largest coal producer Coal India Limited has known to build up huge inventor, as it reported a record production of 536 million tonnes during FY15-16, 42 million tonnes more than the previous year, growth of 8.5 percent.

But with demand tapering, CIL had started building huge inventory that has forced them to explore other markets to export. However, inventory of CIL has started coming down. The idle inventory was to the tune of 55 million tones on March 31, which has now come down to around 40 million tones.

It is learnt that, CIL is also exploring opportunities to export the fuel to Bangladesh. However, Swarup added, “Most of the demand for coal comes in the second half of the year. We will export only when our domestic requirements are fully met and then we are left with the fuel.”

Meanwhile, the government auditor Comptroller and Auditor General of India (CAG) had pointed serious holes in the e-auctioning process of the coal ministry. The CAG said that the competition may have been restricted in auction of 11 coal blocks on account of multiple bids by corporate groups made through joint ventures or subsidiaries.

However, official sources said that the deficiency stated by the audit body is non-considertaion of indirect taxes as these mines were for ‘captive use’. “There was no sale of coal, no sale revenue and therefore no indirect taxes payable,” sources added.


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