Commercial mining: Maiden coal auctions draw good response
Of course, the absence of global mining giants such as BHP Billiton, Rio Tinto and Glencore was conspicuous, but analyst noted this is seemingly because these companies are gradually withdrawing from the coal industry.
Boosting the prospects of a sharp acceleration in India’s
coal production and near elimination of the need for thermal coal imports in
the medium term, the maiden auction under the commercial coal mining policy saw
aggressive bidding by domestic and home grown firms on Monday. While five
commercial coal blocks went under the hammer, the winning bidders offered to
pay handsome amounts to the respective state governments as revenue share, up
to 31% in two cases.
The largest mine offered — Radhikapur West in Odisha — was
won by Vedanta, which agreed to a revenue share of 21%, while Aditya Birla
Group’s Hindalco Industries bagged the Chakla blocks in Jharkhand, the second
largest among the auctioned block by quoting a 14.25% revenue share.
Of course, the absence of global mining giants such as BHP Billiton,
Rio Tinto and Glencore was conspicuous, but analyst noted this is seemingly
because these companies are gradually withdrawing from the coal industry.
This would also be the first set of coal assets to be
auctioned off through the new market-determined revenue share model that
replaced the fixed fee/tonne regime that turned off private investors. These
assets are unexplored ones, and the investors will enjoy certainty of tenure
from the prospecting to the production stages.
The smaller blocks witnessed more intense bidding, with
Yazdani International quoting the highest bid of a 30.75% revenue share for the
Marki Mangli 2 mine in Maharashtra. For the Takli Jena Bellora block in
Maharashtra, Arurobindo Realty quoted a 30.75% revenue share. JMS Mining’s bid
of a 10.5% revenue share was the highest quote received for the Urtan block in
Madhya Pradesh.
As many as 19 blocks will be auctioned in this batch of
auctions, scheduled to end on November 9.
Other bidders who participated in Monday’s auction but did
not win any coal block include Adani Enterprises, Jindal Steel and Power and
Sunflag Iron and Steel Company. The government on June 18 had launched the
maiden auction for commercial coal blocks, where the requirement of prior
experience for prospective bidders had been done away with to attract
investors.
The Centre initially estimated commercial coal mining to
contribute about Rs 20,000 crore annually to states as revenue and potentially
save Rs 30,000 crore per annum by substituting thermal coal imports. However,
the actual benefits seem to be much lower as the estimates were based on output
from 41 mines with an annual peak production capacity of about 225 million
tonne (MT).
While three of the blocks were removed from the list
following the objections from Maharashtra and Chhattisgarh state governments,
the Union coal ministry had received bids for only 23 coal mines out of the 38
blocks offered. Four mines received only one bid each, rendering them
unqualified to be put up for auctions.
Credit Suisse wrote: “We highlight that at a peak rated
capacity of 51 mtpa (26% of the total 197 MT which were put up for auction),
these (19 blocks) comprise only 5% of India’s coal demand.” The agency also noted
that these mines would need to take various clearances (environmental, forest
and land acquisition) before they start operations. “Our base case is that it
would take new owners 4-5 years to start production, unless the government
fast-tracks clearances.”
Analysts at CARE Ratings had earlier noted that “subdued
economic activity and liquidity constraints may result in lower interest among
the private players to invest in commercial mining rights”. It also noted that
stricter environmental norms are being adopted world over and with that many
companies are increasingly moving towards greener and cleaner fuels. “This may
therefore fail to entice participation from foreign companies,” it added.
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