CCEA approves new auction methodology for coal mines; buyers to bid on revenue share

After allowing private participation in the coal sector, the Cabinet Committee on Economic Affairs (CCEA) has approved a new methodology for the auction of coal and lignite mines/blocks on revenue sharing basis instead of the regime of fixed rupee/tonne. The methodology was approved in a meeting on Wednesday which was chaired by Prime Minister Narendra Modi. 

The new methodology invites interested buyers to bid on revenue share i.e. the bidders will be required to bid for a percentage of share of revenue payable to the government. The floor price has been set at 4 per cent of the revenue share and bids would be accepted in multiples of 0.5 per cent. After the percentage of revenue reaches 10 per cent, the bids would be accepted in multiples of 0.25 per cent of the revenue share. The official statement has also announced that there will be no restriction on utilisation or sale of the coal from the coal mine. 

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The new methodology has been introduced in an attempt to make maximum coal available in the market at the earliest. It is also expected that the new method will enable adequate competition which will allow discovery of market for the blocks and faster development of coal blocks. Higher investment in the mining sector is also aimed at creating direct and indirect employment in coal-bearing areas. 

The successful bidder shall be required to make monthly payments which shall be determined as a product of the percentage of revenue share, the quantity of coal on which the statutory royalty is payable during the month and notional price or actual price, whichever is higher. 

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'Rs 50,000 cr for reforms in Coal Sector'

Detailing the Aatmanirbhar Package announced by PM Modi, Finance Minister said that there is a need to reduce import of substitutable coal and increase self-reliance in coal production and added that the government is bringing commercial mining in the coal sector. CM on coal on a revenue-sharing basis would help more coal availability at market prices. She further announced Rs. 50,000 crore to bring in reforms in the coal sector.

"There will be liberalised entry for people to participate for a range of coal blocks, the government will introduce competition, transparency, and private sector participation in the Coal Sector through revenue sharing mechanism instead of the regime of fixed rupee/tonne. This means, now, any party can bid for a coal block and sell in the open market," said the Finance Minister.

"Entry norms will be liberalised. The government will offer nearly 50 blocks immediately with no eligibility conditions, but only upfront payment with a ceiling," she added.  

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