Auction Day 5: Essel Mining, Aurobindo Realty bag one coal block each

Two large coal blocks, with a combined annual peak production capacity of 15 million tonnes (MT), were auctioned off to private players on Friday and winning bidders offered handsome revenue share to state governments in order to win the mines. Aditya Birla Group’s Essel Mining grabbed the Radhikapur East block in Odisha by quoting a revenue share of 16.75% and for the Urma Paharitola mine in Jharkhand, Aurobindo Realty made the highest bid of 26.5% revenue share.

The Union government expects the Odisha government to earn Rs 467 crore annually from revenue share, when the Radhikapur East mine reaches its annual peak production capacity of 5 MT. Similarly, Jharkhand is expected to earn Rs 1,416 crore from Urma Paharitola mine’s peak annual production of 10 MT. This is the first time that coal assets are being auctioned off through the new market-determined revenue share model, replacing the erstwhile fixed fee/tonne regime.

However, the Supreme Court said on Friday that any action taken by the Centre regarding the commercial coal mine auctions for blocks in Jharkhand would be provisional, and shall be subject to the order of the apex court when it next takes up the matter. Jharkhand government had moved the Supreme Court, raising its objections against conducting commercial coal auctions for mines in the state, and alleging that it would cause destruction of eco-sensitive zones. The apex court may set up an expert committee to ensure “forests are not destroyed” due to commercial coal mining.

Of 19 blocks to be transferred to commercial miners in this phase, between November 2-9, 17 have so far been auctioned off. Out of the five mines in Jharkhand earmarked for commercial auctions, four have already been bid out till Friday, for which the highest bidders have been Hindalco, State government undertaking company Andhra Pradesh Mineral Development Corporation, Fairmine Carbons and Aurobindo Realty. On reaching peak production capacity, the state government is seen earning Rs 2,169.3 crore annually as revenue share from these four blocks.

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 MT.