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Move away from fixed rupees per tonne basis to revenue share auction
New Delhi, May 20, 2020
The Cabinet Committee on Economic Affairs (CCEA) today approved the methodology for auction of coal and lignite mines and blocks for sale of coal and lignite on revenue-sharing basis and increasing the tenure of coking coal linkage.
The methodology provides that bid parameter will be revenue share, an official press release said.
The bidders would be required to bid for a percentage share of revenue payable to the Government. The floor price shall be 4% of the revenue share. Bids would be accepted in multiples of 0.5% of the revenue share till the percentage (%) of revenue share is up to 10% and thereafter bids would be accepted in multiples of 0.25% of therevenue share.
There shall be no restriction on the sale and/or utilization of coal from the coal mine, the release said.
According to it, the methodology is oriented to make maximum coal available in the market at the earliest and it also enables adequate competition which will allow discovery of market prices for the blocks and faster development of coal blocks.
"Higher investment will create direct and indirect employment in coal- bearing areas especially in mining sector and will have an impact on economic development of these regions," the release said.
The successful bidder shall be required to make monthly payments which shall be determined as product of the percentage (%) of revenue share (final bid); quantity of coal on which the statutory royalty is payable during the month; notional price or actual price whichever is higher.
The upfront amount shall be 0.25% of the value of estimated geological reserves of the coal mine payable in 4 equal instalments. However, the upfront amount payable shall be as per actual calculation as per above method or as per ceiling, whichever is lower.
The upper ceiling of upfront amount will be Rs 100 crore up to 200 MT of geological reserves and Rs 500 crore above 200 MT.
It also permits commercial exploitation of the coal bed methane (CBM) present in the mining lease area.
The release said the methodology provides incentives to the successful bidder by way of offering rebates in revenue share in events of early production of coal from the coal mine and the total quantity of coal consumed or sold or both for gasification or liquefaction on an yearly basis from the coal mine.
As the entire revenue from the auction/allotment of coal mines would accrue to the coal bearing States, this methodology shall incentivise them with increased revenues which can be utilised for the growth and development of backward areas and their inhabitants including tribals. States in Eastern part of the country will be especially benefited, it said.
Tenure of coking coal linkage in the non-regulated sector linkage auction has been increased up to 30 years, the release added.