Jindal Power wants govt to honour coal auction outcome

Holding company JSPL chief executive Uppal says reauctioning will be a big blow to fairness of the system.

Kept waiting by the government on the allocation of two coal blocks for which Jindal Power emerged the winning bidder, Ravi Uppal, managing director and chief executive of Jindal Steel & Power, the holding company, has said the government should respect the outcome of its own auctioning process. 

Speaking to Business Standard, he said his group had bid strictly in compliance with the procedure set out by the government. "We appreciate the transparent and flawless process followed by the government," he said, adding "if the process is transparent and clear, the outcome is also the same." 

Before the Supreme Court had cancelled 204 coal block allocations, via the screening committee route through the past two decades, the group had a total of nine mines.

While three operational mines in Chhattisgarh had a capacity of 12 million tonnes (mt), six were yet to start production.

A block for a coal-to-liquid project had been de-allocated by the government, though the cancellation was challenged by the company. 

Uppal said the Gare Palma IV/2 & 3 and Tara blocks met the requirements for power plants alone. "Our steel plant requirement is not yet met, for which we plan to bid for mines that will be put on auction from schedule-III and some mines that will come up from schedule-I." 

He added no two blocks could be compared because of their different sizes, gross calorific values of their coal, locations in respect of the end-use plant, whether they were operational or not and whether they required open cast, underground or a hybrid of both the mining procedures.

Citing the example of Gare Palma IV/2 & 3, he said the mining commitment was to produce 6.25 mt annually, or about 20,000 tonnes daily. JSPL already has six km of conveyor belt linked to its plant for evacuation; if that wasn't the case, it would need at least 1,000 truck trips a day. 

Uppal said the auctioning process went well and whatever the outcome of the process was, it should be respected. "By reauctioning, it will erode the confidence of the bidders; it will be a big blow to the fairness of the system." 

So far, 31 mines have been auctioned for end-use in the iron & steel, cement, captive power plant and power sectors; of these, 18 are under schedule-II and 13 under schedule-III.

The winning bidders for eight (three of schedule-II and five of schedule-III) of these blocks are yet to receive any communication from the coal ministry on the vesting order. 

Mines that couldn't find even three bidders had to be withdrawn from the auction.

Examples of such mines are Durgapur-II Taraimar and Durgapur-II Sariya, with power as end-use. Similarly, a few blocks in the steel, cement and captive power category such as Dongri Tal-II, Parbatpur and Central had to be withdrawn. 

Uppal said, "The idea behind reverse bidding and setting a ceiling price for coal for power blocks is the lowest price discovered will help bring the cost of power down. If revenue maximisation was the objective, the ministry should not have done reverse auction for power, but forward auction, as in case of steel, with a minimum floor price." 

"With reference to the Gare Palma IV/2 & 3 and Tara coal blocks, we would like to state the winning prices are not at all low and are most competitive. For Gare Palma IV/2 & 3, the ceiling price was Rs 700 a tonne. The applicable ceiling price for the e-auction stage was nil, as that was the lowest quoted initial price offer; that means a discount of Rs 700 a tonne was already given for the mining cost, before moving to the forward auction. An additional premium of Rs 108 was arrived at in the forward auction - a total cost of Rs 808 a tonne is not a low price. It means we would not be paid for mining coal and would additionally be paying Rs 108 a tonne, along with royalty, taxes and cess, which comes to about Rs 500 a tonne to the government." 

For Tara, the ceiling price was Rs 970 a tonne and, along with the additional premium of Rs 126 a tonne, the amount comes to Rs 1,096 a tonne. "These blocks have challenges (especially logistics), due to which many players might not have found these attractive," Uppal said. 

A total of 11 bidders took part in the auction of Gare Palma IV/2 & IV/3, the most for any schedule-II coal block for power; for the Tara coal block, there were 10 bidders. Bidders for Gare Palma IV/2 & IV/3 included Adani Power Maharashtra, DB Power, GMR Chhattisgarh Energy, JSW Energy, Reliance Geothermal Power and Sesa Sterlite.

Those for Tara included Adani Power, Jaiprakash Power Ventures, Jindal Power, JSW Energy and Lanco Amarkantak Power. "If the bidders decided not to go beyond JPL's price, it is not something we can help. We find it strange that it is being questioned," Uppal said. 

Besides Jindal Power, other companies waiting for a government decision on the matter include JP Associates, Balco, Hindalco, BS Ispat, Usha Martin and Tirumala Industries.