Commercial Coal Mine Auction: Dawn Of A New Era
Steel Insights|December 2020
The month of November turned historic with the execution of country’s maiden auction of coal mines for commercial usage that marked country’s transition to a liberalised coal sector that promises access to a fuel on demand at competitive prices without bureaucratic hassles and monopolistic attitude.
Sumit Maitra

Moderate response

The auction, conducted under the shadow of the still raging pandemic and in an environment of economic hardship saw moderate success with 50 percent of the mines – 19 out of 38 – receiving financial bids.

Moreover, few very large mines like Chhendipada, Kurloi (A) North, Machhakata, Brahmanbil-Kardabahal, North Dhadu with average annual production of around 15mt received one or no bids and hence, were not eligible for being awarded.

The highest premium touched 66.75 percent with average premium at 29 percent.

The average success rate of the previous 10 tranches of coal auctions remained at about 30 percent as only 35 mines could be auctioned, out of 116 mines put on auction during the last 10 tranches.

Majority of 42 companies which participated in the auction, were from private sector with just two PSUs - NALCO and Andhra Pradesh Mineral Development Corporation Ltd –came from the public sector.

Out of these successfully auctioned 19 mines, 11 are opencast, 5 are underground mines and remaining 3 are a mix of underground and opencast mines located in 5 states - Madhya Pradesh, Chhattisgarh, Odisha, Jharkhand and Maharashtra having consolidated Peak Rated Capacity of 51 million tons a year.

More than half are “Nontraditional” player

With the removal of end-use criteria and significant net worth requirement, 65 percent of bidders are “non-traditional” players, meaning these players have no experience of owning or managing or operating coal mines.

These bidders were from sectors like real estate, infrastructure, pharma as ‘end use’ criteria was removed from the bidding process.

That isn’t a bad thing though as many of the winners have either prior experience in minerals like iron ore or have significant business operations giving them the bandwidth to manage diversifications.

Aurobindo Realty & Infrastructure Pvt Ltd, which has own the Takli Jena Bellora North, Takli Jena Bellora South in Maharashtra and UrmaPaharitola in Jharkhand in the auction, describes itself as a new breed of real estate developers having 14 million sqft of area under development.

Yazdani International Private Ltd of Odisha which has won the much talked about Marki-Mangli II block, is an exporter of iron ore.

The group describes itself as an “export house, active in the commerce of metals and minerals including iron ore, chrome ore and manganese ore” and claims to have established itself as a “reliable mine owners in Odisha”.

Fairmine Carbons Pvt Ltd is a petroleum and coal products manufacturing company in Jharkhand according to a Dun & Bradstreet database.

Chowgule and Company Pvt Ltd which won the Sahapur (East) mine in Madhya Pradesh, is part of the Chowgule Group and has mining operations in Goa and Karnataka.

The group’s mining division, located in Goa’s rich iron ore belt, produces and exports over 5 million tons of iron ore and iron ore pellets per annum, all around the globe.

After winning the mine, Chowgule appointed Rajeev Bora as the CEO of its mining division, who was previously vice president of mining at Hindustan Zinc, company officials said.

The Chowgule Group claims to be the first to mechanise mining operations in India, in 1952 at Sirigao Mines in Goa.

It is difficult to pre-judge whether entry of such non-traditional players would improve the coal mining sector and contribute positively when many of the mines belongs to ecologically sensitive areas.

“How can you judge a startup, which is valued as being disruptive? On the other hand, a track record gives comfort as well as a sense of how they would operate. The key need is for a stakeholder with a long-term vision and the ability to see through short-term ups and downs,” says Rahul Tongia, Senior Fellow at the Centre for Social and Economic Progress who has been studying the coal sector closely.

Safeguards against ‘fly-by-night operators’

The government, on its part, tried to ensure that no frivolous players took advantages of relaxed entry norms.

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