Metals and Mining - Final Guidelines for Coal Auctions Issued :: Edelweiss, link

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The Ministry of Coal today issued final guidelines for auctioning the recently deallocated coal blocks with minor modifications to the draft guidelines issued last month. Key changes are: (i) besides the floor price or reserve price, as the case may be, the auction or allotment amount will include a fixed amount for the value of land and mine infrastructure and also the variable amount of the bid; (ii) accommodated projects which are getting commissioned in phases by relaxing the 80%/60% (respectively for Schedule II and Schedule III mines) capex completion requirement to 40%/30%, respectively, for the second and subsequent phases; and (iii) permits utilisation of coal for any other plant of the successful allocatee for ‘common specified end-use’ subject to approval of the Central Government. We remain constructive over the guidelines and await clarity on the critical issue of ‘reserve price calculation methodology’ and end-use wise segregation of mines.

Rules for coal block auctions finalised

The Government of India today finalised the Coal Mines (Special Provisions) Rules, 2014, for auction of the recently deallocated mines. Majority of the rules mentioned in the draft guidelines (refer our note, Draft guidelines for coal auctions, dated November 19, 2014) have been retained. Apart from the key changes mentioned above, the other minor changes observed are: (i) capacity of the specified end use project will be in proportion to the capacity of Schedule II or Schedule III coal mine, as the case may be, for which a company is bidding; (ii) payment of fees for participating in the tender process has been relaxed to a fixed non-refundable amount of INR0.5mn vis-à-vis earlier proposed fee linked to the geological reserve of mines which ranged from INR0.5mn to INR10mn; and (iii) the vesting order or allotment order will be cancelled by the nominated authority in case of breach of terms of the agreement, misrepresentation of facts, violation of the provisions of the ordinance and/or in the event of cancellation of mining lease under any other law in force.

Reserve price methodology and detailed eligibility criteria awaited

While the final rules are a step forward in the auction process, no clarity is yet provided on: (i) reserve price methodology for bidding; (ii) segregation of mines as per end use; and (iii) details of financial and technical criteria to be eligible for bidding.

LINK

https://www.edelweiss.in/research/EdelFlash-Metals-and-Mining--Final-Guidelines-for-Coal-Auctions-Issued/27820.html