New Delhi: Indian metal and cement companies have bid aggressively for coal blocks in the country’s first auctions to sell mines as they look to cut imports and their dependence on inefficient government monopoly Coal India Ltd. According to Union minister Piyush Goyal, the allocation of coal blocks, including through the ongoing auction, will fetch a whopping Rs 15 lakh crore over the next 30 years, for the respective states.
The auction follows a court cancellation of all previous licences and the initial bidding suggests companies are ke-en to secure supplies as the economy improves. The companies are allowed to bid for enough coal to fuel a 50 per cent expansion of their current metal or cement capacity.
The stiff competition may strain the balance sheets of the winners, including aluminium makers Hindalco Industries and BALCO, Jaiprakash Associates, Sunflag Iron and Steel, OCL Iron & Steel, Reliance Cement and Essar Power.
Most of the winning bids so far have been higher than analysts’ expectations based on the benchmark price of state-run Coal India. OCL, for example, would pay 2,302 rupees ($37) per tonne, 50 per cent more than Coal India’s average price for the grade available in the mine OCL has won.
Post auctions, the coal minister said that the country would also see the power costs coming down because the benefit of the auction will have to be passed on to the consumers. The Eastern part of the country, particularly Odisha, Jharkhand, West Bengal and Chhattisgarh will get significant amount of revenues from the auction of the mines which would help them to develop faster.
“At the end of the fifth day (of the auction of blocks), we are looking at about Rs 60,000 crores in the next 30 years accruing to the state governments,” Goyal said. The Minister further said that the mines on auction are very small and producing blocks as a result the “pricing was a little more aggressive.”
“So, we will have to look at a more sustainable valuation once the process of of schedule III mines (ready to produce) is also underway,” the Union minister added.
