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The National Democratic Alliance (NDA) government may have to expedite implementation of the coal auction policy that the UPA government had approved last year.
In September last year the UPA cabinet had approved a policy to give coal-mining licences to private companies through the competitive bidding route.
The new auction-based system, a first in India, was brought in to replace the earlier controversial policy of allotting coal blocks based on the recommendations of a bureaucrats’ panel called the ‘screening committee’.
The decision followed the relentless attack from the Opposition on the UPA government after India’s national auditor, the Comptroller and Auditor General (CAG), suggested in a report last year that the arbitrary allocation of coalfields may have robbed the exchequer of potential revenues of `1.86 lakh crore between 2004 and 2011.
The new rules were aimed at making allocations more transparent and keeping non-serious players out of the fray as many companies that were given coalfields earlier haven’t yet started mining operations.
Under the new rules, successful bidders will have to disclose a work schedule, make payments linked to the volume of coal dug out from the mines apart from shelling out an upfront fee equivalent to roughly 10% of the estimated value of the coalfield.
The successful bidders will get two years to explore and five year to develop the mines. The coal blocks will come bundled with preliminary environment and forest approvals before they are auctioned.
More than half of India’s power is produced from coal. State-owned Coal India Limited accounts for nearly 80% of the country’s coal output, but it isn’t enough to meet India’s rising energy demand.
Earlier, Coal fields were allocated by a screening committee of bureaucrats. Interested firms were ranked on the basis of different parameters such as land and environmental clearances.
Under the policy that the UPA government had approved, coal fields were to be auctioned through a transparent competitive bidding. Blocks put up for auction will come pre-approved with preliminary environmental clearance. It had also made it mandatory for successful bidders to make production-linked and upfront payments.