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Web Exclusive | December 2012

Govt to charge reserve price from CIL for 116 blocks

Minister of State for Coal, Pratik Prakash Babu Patil informed Rajya Sabha that the government was in the process of fixing a reserve price for auction of coal blocks through competitive bidding and once this is finalized, Coal India (CIL) would be asked to pay the price for 116 blocks alloted to it in May 2012.

Patil said while assigning 116 coal blocks it was intimated to CIL that the reserve price payable in respect of the above blocks is yet to be worked out and on finalisation of the reserve price, the same would be required to be paid by CIL. So far, Coal India was not paying any reserve price to the government.

The government had asked financial service firm CRISIL to provide a report on the methodology to determine the reserve price for bidding of the blocks. CRISIL, which submitted its draft report in October, has reportedly suggested preparation of a robust feasibility report of the blocks and usage of Discounted Cash Flow (DCF) method for valuation of the blocks.

Meanwhile, the government notified 'The Auction by Competitive Bidding of Coal Mines Rules 2011' on February 2, 2012 after Parliament passed an amendment in Mines and Minerals Development and Regulation Act (MMRDA) to introduce competitive bidding as a selection process for allocation of blocks.

Under these Rules a floor price for such area shall be notified for inviting the bids and a reserve price is fixed, which is payable by the government companies and for the blocks alloted to the companies that are awarded power projects on the basis of tariff based bids, Patil said.

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