New entrants win coal blocks in Jharkhand, Madhya Pradesh

Two smaller coal blocks, with a combined annual peak production capacity of 1.5 million tonne (MT) were auctioned to private players on Thursday. The blocks went to new entrants in the sector; Goa-based Chowgule and Company grabbed the Sahapur East block in Madhya Pradesh by quoting a revenue share of 41%, while Fairmine Carbons made the highest bid of 23% revenue share for the Rajhara North mine in Jharkhand.

The Union government expects the Jharkhand government to earn Rs 119 crore annually from revenue share when the Rajhara mine reaches its annual peak production capacity of 0.75 MT. Similarly, Madhya Pradesh is expected to earn Rs 142.5 crore from the Sahapur East mine’s peak annual production of 0.7 MT.

So far, 15 of the 19 blocks that are to be transferred to commercial miners in this phase between November 2 and 9 have been auctioned. Larger companies such as Vedanta, Adani and Aditya Birla Group’s Hindalco Industries have won one mine each till date. Adani Enterprises was also in the race for the Rajhara North block on Thursday.

This is the first time that coal assets are being auctioned through the new market-determined revenue share model, replacing the erstwhile fixed fee/tonne regime.

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. While three of the blocks were removed from the list following objections from the Maharashtra and Chhattisgarh governments, the Union coal ministry 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 auction.