The Associated Chambers of Commerce and Industry of India (Assocham) has suggested the government to give preference in allocation of cancelled coal blocks to captive block allocatees who have an operational or soon to be operational end-use-project. Auctions should be opened for others only after coal for these projects is secured.
In a note submitted to the Prime Minister Office (PMO), the Chamber has stated that coal blocks already allotted for end use steel projects should be auctioned only for steel projects and similarly coal block allotted for end use power projects be auctioned only for power projects.
The reserve price and upfront payment should be based on actual mineable reserves only (as assessed by CMPDIL/MECL etc) and not on the basis of geological reserves. The sub-blocking should remain as it is and clubbing of blocks should be avoided so that the end use plants of small capacities can also bid in the auction process.
Clearances accorded to the existing coal blocks should automatically get transferred to the new allocatees. Obtaining these clearances again will lead to considerable delays in commencement of production from mines and adversely affect the end use projects. Bidding for end use power as well steel projects should be on the basis of upfront payment fixed by MoC and extractable reserve linked payment quoted by the bidder in INR/tone.
Referring the compensation to be given to original allocates, the chamber said, criteria should be land prices as determined by the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 and other investments made in the coal block at current market value.
Assocham says that auction process should accord Right of First Refusal (RoFR) to the existing allocatees of the coal blocks who have end use plants either operational or soon to be operational or to the allocatees which have taken substantial effective steps to set up end use plants.
End-use-projects are interlinked with specific mines in terms of proximity, evacuation arrangement and giving RoFR would ensure that no additional burden is put on the already stressed infrastructure facilities and will be in national interest. Denying RoFR will severely affect the interests of the genuine companies who had invested huge amount of money in their end use plants and have taken huge loan from the banks for setting up the same.
In the interim period till the time auction process is completed, Assocham suggests that original coal block allocatee can be appointed as Contractor/MDO and unconditional FSA should be provided in cases where the end use project is either operational or is about to become operational. In case the coal block allocatee is not successful in obtaining the coal block under the auction process, government must ensure restoration of coal linkages granted prior to allocation of coal blocks.
Referring the levy of penalty of Rs 295 per metric tonne Assocham says, the figure is erroneous as the CAG has arrived at Rs 295 per metric tonne taking into account average realization of all grades of coal of CIL (Rs 1,028 per tonne) and the average cost of CIL for the year 2010-11. Whereas the quality of coal in the allocated coal blocks is much inferior and is predominantly of F&G grade whose price is much lower.
Assocham says the government may consider filing an application for modification and or petition for review of the order dated Sept. 24, 2014 so that the erroneous interpretation levying the retrospective penalty may be modified as the government has itself stated on affidavit that the penalty was only for retention of 40 operational coal blocks.
