The e-auction of coal blocks for private companies got the nod from President Pranab Mukherjee who promulgated an ordinance cleared by the Union Cabinet in the backdrop of the Supreme Court order quashing 214 coal blocks to companies since 1993.
The move, seen as a step towards energy sector reforms, will allow private companies to bid for captive use and allot mines directly to state and central public sector undertakings.
The Cabinet, chaired by Prime Minister Narendra Modi, on Monday recommended to the President promulgation of ordinance in order to resolve the pending issues particularly the situation arising out of the Supreme Court judgement quashing the allocation of the coal blocks.
Following this Ordinance, state sector requirements including those of the Central and state governments would be met through government dispensation route and coal mines would be allocated to PSUs like NTPC or state electricity boards.
Government will put sufficient coal blocks on e-auction for the private sector players who are into the cement, steel and power sectors.
Union Finance Minister Arun Jaitley had said last evening that the e-auction process will be "transparent" and completed in "three to four months" with proceeds going entirely to the state governments where the mines are located.
The biggest beneficiaries would be the eastern states like Jharkhand, Odisha, West Bengal and Chhattisgarh. States like Madhya Pradesh, Maharashtra and Andhra Pradesh would also benefit.
All companies, except those convicted by courts, will be allowed to participate in the auction and there will be no right of first refusal and all bidders will have to compete in the e-auction through reverse bidding.
The coal blocks, which were earlier allocated through a screening committee mechanism, became a political issue after Comptroller and Auditor General (CAG) alleged arbitrariness and absence of any criteria in the screening process and pegged notional loss to the exchequer at Rs 1.86 lakh crore.
The apex court had last month quashed allocation of 214 out of 218 coal blocks alloted to various companies since 1993, terming the method as "fatally flawed".
“The Cabinet’s decisions are with the view of cleaning up the coal mess due to allocations via the screening committee mechanism that the Supreme Court quashed,” Union Finance Minister Arun Jaitley said briefing reporters after the meeting of the Union Cabinet.
Asked whether the companies whose allocations were cancelled by the apex court would be allowed to participate in the e-auction, Coal Minister Piyush Goyal said, "Any convicted company will be debarred."
On whether the Coal Mines Nationalisation Act, 1973 would be amended to allow commercial mining, Goyal said an enabling provision for future commercial use of mines would be there as an amendment. "This is only for the future," he said.
"There will be an enabling provision for the future where under rules which are framed for commercial users of mines could also be decided by the Central government. This would lead to an optimal utilisation of the natural resource."
Replying to questions on the fate of Coal India, Jaitley said, "This process would not in any way impact the structure of Coal India. Coal India would continue to function as it is and all the mining requirements of CIL in present and future will be adequately protected."
CIL at present accounts for over 80 per cent of the domestic production. Private companies having end-use plants like steel, cement and power used to get mines through screening committee mechanism.
On allowing foreign players in auction, Jaitley said only companies incorporated in India would be allowed to participate in the bidding for which the reserve floor price will be determined by a committee and the auction will be sector-specific.