Second round of commercial coal auctions starts on a dismal note

The second round of commercial coal auctions kicked off on a dismal note in India, with companies offering to pay modest amounts to the respective state governments as revenue share for the three blocks on offer. Two out of the three winning bids were lower than even the lowest revenue sharing percentage discovered in the maiden round of commercial coal bidding in November last year.

The highest bid was offered for the Jogeshwar and Khas Jogeshwar block in Jharkhand by South West Pinnacle Exploration, which agreed to a revenue share of 24.3%. The company traditionally offers drilling, exploration and seismic services to coal and metal mining industries.

Adani Power Maharashtra bagged the Gondkhari block in Maharashtra by quoting a 9.5% revenue share. Adani subsidiary CG Natural Resources, formerly known as Adani Iron Ore Mining, won the Jhigador mine in Chhattisgarh against a bid of 6% revenue share.

The mines offered in the second tranche of the commercial coal auction are mostly unexplored, and companies will have to execute elaborate exploration activities to find out the actual amount of coal reserves housed in these areas. This would also be the second set of coal assets to be auctioned off through the new market-determined revenue share model that replaced the fixed fee/tonne regime that turned off private investors.

The Union coal ministry had offered 67 blocks under the second round of auction for commercial mining received bids, against which it had received interest for only 19 coal mines. Of these, 11 blocks has received interest from only one company each, and subsequently the auction process for these blocks got annulled. Even the first round of bidding under the new commercial coal mining policy had received modest response from investors, and 20 mines out of the 38 offered could be auctioned off. Mines currently under litigation or overlapping with active coal-bed methane blocks were also not included in the latest list.

Out of the 3.4 lakh tonnes of total coal reserve in the country, mines with extractable reserves of 2.3 lakh tonnes currently stand allocated to different entities. Public sector undertakings own currently own blocks with combined reserves of nearly 2 lakh tonnes.

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