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Coal Auction Proceeds Cross Rs 193 Lakh Crore
Highlights
India has hit a gold mine with the recently concluded auction of 29 coal mines in two phases. The public exchequer continues to swell on revenue from coal block auctions. The total proceeds from the coal mines auctions have crossed Rs 1.93 lakh crore; surpassing CAG’s estimate of Rs.1.86 lakh crore losses on account of allocation of 206 captive coal blocks without auction since 1993.
India has hit a gold mine with the recently concluded auction of 29 coal mines in two phases. The public exchequer continues to swell on revenue from coal block auctions. The total proceeds from the coal mines auctions have crossed Rs 1.93 lakh crore; surpassing CAG’s estimate of Rs.1.86 lakh crore losses on account of allocation of 206 captive coal blocks without auction since 1993.
It is estimated that an additional tariff benefit of around Rs 69,300 crore will accrue to the power consumers through the reverse auction of coal blocks. Moreover greater revenue flows to states from the auctions dovetails with the government’s plans to develop the coal-rich eastern region.
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It is estimated that Rs 3.35 lakh crore of likely revenue to States through coal mines e-auctions & allotments. Jharkhand and Chhattisgarh are likely to receive a total of nearly Rs 1.10 lakh crore each, including royalty over 30 years from just the second phase of auction.
The sale of mines belonging to two categories, those already producing (19) and those ready-to-produce (14), which started on February 14 ended on 9th March. The transparency in the auctions has paid rich dividends. Producing blocks saw higher bids than the ready to produce assets. The two rounds of auction would see power rates coming down by Rs 69,300 crore. These rate cuts will be offered by companies bagging coal blocks reserved for the power sector. The lower cost of power would benefit coal bearing states such as Odisha, West Bengal, Jharkhand, Chhattisgarh, Madhya Pradesh and Maharashtra.
Prime Minister Shri Narendra Modi had said earlier this month that CAG’s Rs.1.86 lakh crore loss figure in coal block allocation has raised some doubts initially. But the auction of less than ten per cent of those mines, that is, 19 mines in the first tranche alone garnered around Rs 1.10 lakh crore.
Earlier allocation process, based on discretion & arbitrariness:
In the UPA government, the allocations were made by a screening committee set up by the government. Arbitrary and discretionary allocations based on the political connections and financial clout of aspiring companies and individuals were the norm, rather than a rational and economic logic and genuine needs of companies. In other words, there was no well laid down procedure which is objective & transparent system for allocation of coal mines allotment.
Amendments in the Coal Mines Act though initiated in 2005 were not pursued to its logical end. As a result of this, no fresh coal block allocation could be made during last 4/5 years (2008 onwards). Though milestones were set up for the operation of allocated coal blocks but because of liberal monitoring and repeated extensions given, a very few blocks came in the production.
CAG findings:
In a severe indictment of earlier UPA government, the CAG had in 2012 argued that due to the allocation of coal blocks to private firms , the exchequer had lost Rs 1.86 lakh crore on account of improper allocation of coal mines over the years, triggering a nation-wide uproar.
Cancellation of coal mines by Hon’ble Supreme Court
The matter went to the Supreme Court and in its order dated 24.9.2014 cancelled the allotment of 204 coal mines and held allocation of coal blocks made through the Screening Committee rout and Government dispensation route as arbitrary and illegal.
New well laid down, clean & Transparent System of auction :
In order to laid down robust & transparent system after Hon’ble Supreme Court order, an Ordinance was promulgated to legally enable the Government to re-allocate 204 coal mines cancelled the court and ensure smooth transfer of right, title and interests in the mine along with its land and other associated mining infrastructure to the new allocatee to be selected through an auction or allotment to Government companies, as the case may be.
The Parliament has passed the Coal Mines (Special Provisions) Bill 2015 on 20th March,2015 . The Bill will replace Ordinance issued by the Government, the first as on 21st October, 2014 and then repromulgated on 26th December, 2014, after the apex court cancelled the allocation of 204 blocks.
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