August 10, 2009 / 2:42 PM / 8 years ago

Govt plans auction of captive coal blocks in 2010

NEW DELHI (Reuters) - India plans to begin auctioning coal blocks to industries for their own use in 2010, a first step towards reforms in the sector to spur local output and attract investment, Coal Minister Sriprakash Jaiswal said on Monday.

India has 10 percent of the world’s coal reserves, the biggest after the United States, Russia and China, but its coal imports have grown rapidly from almost nothing five years ago to a projected 70 million tonnes in the current fiscal year.

The imports are forecast to hit 211 million tonnes by 2011/12.

Jaiswal said coal demand was rising in line with economic growth.

“This has led to an increased demand for coal blocks, as this provides an assured source of supply and also enables the end user companies to regulate the cost of major raw material,” he said.

India has allocated 201 blocks with geological reserves of about 45 billion tonnes for both captive and commercial mining. Ninety-seven blocks with reserves of 27 billion tonnes have been allotted to government companies, and rest to private firms.

“The progress in developing these blocks is not very satisfactory. So far only 25 coal blocks have come into production. The progress in respect of coal blocks allocated to state firms is even less encouraging,” the minister said.

At present, a government panel allocates coal blocks to firms in sectors like iron and steel, power, cement, coal gasification and coal liquefaction. But number of applicants per available block is rising, necessitating auctioning of blocks.

After meeting with representatives from provinces, Jaiswal said: “The meeting was good. There was almost 100 percent agreement for auctioning of coal blocks.”

He said auctioning of coal blocks for captive use could begin in 2010 after amendment to relevant act.

State-owned Coal India, which produces nearly 80 percent of the country’s total output, is not keeping pace with local demand because of lack of investment and technology.

Partha Bhattacharyya, chairman of Coal India, said his firm would directly import 4 million tonnes of coal this year mainly for small power producers that cannot import on their own.

By end-August Coal India will invite price and technical bids from 10 shortlisted firms, including steel maker ArcelorMittal and Australia’s Rio Tinto for developing its 18 abandon mines, he said.

“It will be a 50:50 joint venture and the partner will sell its share of coal in local market,” Bhattacharyya said.

Coal India has invited preliminary bids from global majors for a possible partnership to scout for mines in South Africa, Australia, Indonesia and the United States, he said.

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