Windfall in offing: Poor states to reap harvest of coal block auctions

  • Shishir Gupta and Gaurav Choudhury, Hindustan Times, New Delhi
  • Updated: Feb 17, 2015 01:20 IST

One of India's biggest scandals involving arbitrary allocation of coal blocks could bring unexpected windfall to coal-rich but poor states from auction of the mineral, bolstering their ability to fund welfare schemes and trigger a turnaround.

The auction of 204 coal blocks - a corrective step following the scandal - is expected to fetch states such as Jharkhand, Odisha, Chhattisgarh, Madhya Pradesh, Maharashtra and West Bengal Rs 15 lakh crore over a 30-year period, or Rs 50,000 crore a year on an average, from the lease of mines.

This is the first time a natural resource in the states' domain has been placed for bidding.

The Union government began on Saturday auctioning coal mines to private steel, power and cement companies through transparent bids.

"The trend makes me believe it (revenue) would be more than Rs 15 lakh crore," coal secretary Anil Swarup told HT.

The revenue, if realised, would be much higher than what the Comptroller and Auditor General (CAG) had estimated.

In a 2012 report, the CAG had suggested that arbitrary allocation of coalfields may have robbed the exchequer of Rs 1.86 lakh crore in potential revenues between 2004 and 2011, triggering a relentless political attack on the previous UPA government.

The new auction-based system, which replaced the earlier controversial policy of allotting coal blocks based on a bureaucrats' panel, came after the Supreme Court last year struck down over 200 blocks allotted since 1993.

The court asked the government to auction these blocks. The first set of 18 blocks was put up for bidding by February 22.

"The bid price has already reached more than Rs 2,000 a tonne in many coal mines," coal secretary Swarup said.

"Till date, coal blocks worth Rs 11,839 crore have been auctioned, that translates into an annual income of Rs 6,853 crore for states like Odisha, Madhya Pradesh, West Bengal, Maharashtra, Jharkhand and Chhattisgarh," he added.

India's estimated coal reserves stand at 301 billion tonne, the fifth highest in the world, but companies still have to import because a large number of mines remain unused.

More than half of the nation's power is produced in coal-fired plants. The state-owned Coal India Limited, accounts for nearly 80% of the country's output, but it isn't enough to meet the rising energy demand.

Coal imports jumped more than three times over the past eight years — from 41.2 million tonne in 2005-2006 to 140.6 million tonne in 2012-2013.

The government will allot mines directly to state-owned companies such as NTPC and electricity boards.

Mines given through e-auction will have an end-user clause. Only power, steel and cement companies can bid with the proceeds going entirely to the state governments, empowering them fiscally.

On the possible rise in power tariff because of high bids, Swarup said the "reverse auction" process has been designed to keep under control energy costs for the final consumers.

"The technical specification has built a system in the auction process to ensure coal mines attract higher revenues for the state but not result in higher power tariff for consumers," he said.

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