Auctioning coal blocks may not be the best bet
When it comes to safeguarding the
wealth of the nation, the Government seems to be wanting, especially when it
should be playing the role of custodian and guardian of natural resources.The
iron ore issue has just about died down after Supreme Court strictures, as was
the 2G scam. Now, ‘Coalgate’ is off the blocks with presumptive loss estimates
totalling Rs 1.86 lakh crore.The Supreme Court’s general observations on the
need to auction natural resources have made policymakers proactive again.
The Ashok Chawla report of 2011,
which was gathering dust, is back in the reckoning. Most recommendations have
found favour and there appears to be a near-consensus for the auction mode.
However, the dampener is that the
authorities seem to be looking to arm themselves with exploration reports ahead
of the auction. This is not wrong as it helps maximise revenue. Besides, bidders
must know what is in store for them, given the imponderables in mining. But,
then, this will take at least two to three years and, that too, if multiple
agencies work in tandem.The Opposition is after the Government and the latter is
rubbishing the CAG’s assumptions.Given the long list of protagonists and
antagonists for the coal block auction, the question is whether auction is the
only way to ensure efficient allocation acceptable to all quarters?
TRANSPARENCY
Yes, if total transparency needs to
be achieved.
No, if the Government’s objectives
are to accelerate growth, improve the dwindling cost competitiveness of Indian
manufacturing, provide affordable energy to the poor, contain energy subsidy
bill and provide jobs to millions of illiterate and semi-skilled
persons.Consider whether allocations sans auction of coal blocks since 1993
achieved the objective. The Coal Minister said only 20 per cent of the 195
blocks are operational and industry claims even less than that.
Next, are those operational ones
benefiting the people, such as the blocks allocated to the power sector?
Recently, the Coal Ministry
cautioned power generator companies which have been allocated coal blocks to
respond to bids floated by distribution companies (discoms). Importantly, the
Ministry said it was brought to its notice that such companies were not bidding
and even in cases where they did bid, their quotes were on a par with generators
serviced by coal linkages. Obviously, the benefits of allocation have not being
passed on, which was the primary intention of the Government while allocating
the blocks.
It is well known that the closer
one gets to the pithead, the greater the value of coal.Some Indian corporates
which have ventured abroad for coal sourcing have been getting offers at $1 for
every tonne of mine reserve in Indonesia. This does in some ways defeat the
purpose of auctioning sans proper exploration.
A former Coal India head once said
that, on an average, it took the company 10 years to make a mine operational.
The world average is about six years.In India, the quickest, from allocation to
near production, is the Sasan coal mines allocated to the 4000 MW Sasan ultra
mega power project, which is said to have consumed 4.5 years as of date.
Controversies apart, the reasons for Sasan mines to break the time barrier to
bring coal to surface are collaboration, technology and equipment that the
company brought home.
ACCLAIMED EFFICIENCY
It should be understood that the
private sector was bestowed allocations and the onus was on it to bring in
acclaimed efficiencies to ensure early production. Further, it should also be
said that the allottees were not unaware of the multiple issues that needed to
be surmounted.It is also known that Coal India did not want to take up many of
the mines for a variety of reasons, including its manpower cost (till recently
mining operations outsourcing was unheard of).
Eighty per cent of the projects
still have some way to go. There are also apprehensions that the CAG report like
on 2G could lead to de-allocation of mines. Some Parliamentarians have been
voicing this.
NATION FIRST
The Coal Ministry has identified 54
coal blocks with about 18.22 billion tonnes for auctioning. Out of this, 16
blocks with 7.27 billion tonnes are reserved for public sector companies, 16
blocks with 8.16 billion tonnes for power companies through tariff-based bidding
and the balance with 2.79 billion tonnes for companies in other sectors.
In the larger interest of the
nation, the Government could consider drawing up an impartial progress card,
list out allotees who had made little or no progress, and weed out the chaff.Of
course, due consideration should be given to allottees who have very genuine
handicaps such as Naxal-infested areas, locations bordering tiger reserves and
the like.
An over-riding tripartite agreement
could also be considered with the allottee, government and a mine development
operator of proven expertise to ensure early production. The modalities could
also be worked out to ensure adequate return on investment for the
allottee.Alternatively, the allottee could be given the exit option.
For the 54 coal blocks with about
18.22 billion tonnes identified for auctioning, the Government could also
consider bids based on a non-negotiable lowest cost of coal production basis
from well-explored blocks.Another criterion can be timeline-linked expenditure
commitments. Yet another can be the amount of money that a bidder is willing to
commit to the mine restoration fund over and above the stipulated norm.These can
be backed with heavy dead rent for non-exploitation of licensed area and severe
penalties for failure to comply with expenditure commitments and environmental
norms.
Such bidding norms would put off the
wheeler-dealers.
- Umesh Shanmugam
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