Govt begins process of allocating fresh coal blocks

Having burnt its fingers in the coal scam, the United Progressive Alliance (UPA) is being extra cautious while allocating the next set of coal blocks.

Significantly, 38 of the 54 coal blocks identified by the coal ministry will be auctioned while 16 will be set aside for government-run companies.

"Besides the blocks that will be given to PSUs, we are committed to allocating the coal blocks through a process of competitive bidding," Union Coal Minister Sriprakash Jaiswal told MAIL TODAY.

Sources in the coal ministry said that even though the decision to allocate the 54 blocks was taken in May, before the coal scam broke, the government is keen on making this round of allocations "as transparent as possible".

"This might help dilute the coal scam taint to some extent and more importantly it can provide a precedent for a proper distribution of natural resources in general," said a senior government official.

The Comptroller and Auditor General (CAG) report, which estimated that a loss of Rs 1.86 lakh crore had been caused to the exchequer because the government didn't go in for an auction process, appears to be weighing on the government's mind.

This sense of urgency is further evident in the fact that the government has expedited the allocation process for these 54 blocks. In end-August, Jaiswal had said that it would be difficult to complete the process by the end of this year and that the allocations might take place only next year. This has changed.

"We hope to allocate these coal blocks in two months time," Jaiswal said on Tuesday. "We need to hold discussions with the states in which the blocks are located after which we will take the process forward."

The coal ministry is likely to meet the chief secretaries of states like Orissa, Jharkhand, Chhattisgarh, Madhya Pradesh and West Bengal on October 15.

To ensure that there are no technical flaws in the process, the government had assigned the task of providing the methodology for determining the floor price and reserve price for the coal block allocations to Credit Rating and Information Services of India Ltd (CRISIL). The credit-rating firm submitted its report to the government on Monday, which is being examined by the coal ministry.

The government's hurry appears to have rubbed on CRISIL as well as it submitted the report more than one month ahead of time.

Towards end-August, CRISIL had said that the report would be submitted in three months time. Interestingly, even CRISIL was given the contract for preparing the methodology after it emerged as the lowest bidder in a process of competitive bidding in May this year.

The 54 blocks have about 18.22 billion tonnes of coal reserves. As far as their end-use pattern is concerned, there is a distinct preference for power generation as 16 blocks with about 8.16 billion tonne reserves will be allocated to power companies through a process of tariff-based bidding.

Sixteen blocks have been reserved for PSUs. Out of this, 12 blocks will be for commercial mining and four for the production of integrated steel.

Eight blocks meant for integrated steel production will be open to bids by private companies. Seven blocks have been set aside for cement production, five for sponge iron and two for surface gasification.

However, merely maintaining transparency in the allocation process might not mean the end of the government's troubles. It will also have to arrive at a mechanism to ensure that the firms who get the coal blocks begin production on time.

In association with Mail Today