Coal block auctions to result in lower power rates, says minister

States with rich coal deposits are going to earn huge revenue as the bidding has been very aggressive

GN Bureau | February 20, 2015


#coal block   #auction   #power   #piyush goyal   #court   #bidding  

Even as the government is looking at bonanza from the coal blocks auction, power minister Piyush Goayl has said that the power tariff will come.

The allocation of coal blocks will fetch a whopping  Rs15 lakh crore over the next 30 years, for the respective states.

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 important thing is that post these auctions (of coal block) there will be three to four very important changes...Overall the entire economy will get a push with adequate fuel reaching these end-use plants,” Goyal told reporters in New Delhi.

The government has put on offer 19 coal blocks in the first lot for auction.  The government is auctioning the coal blocks after the Supreme Court cancelled allocation of 204 mines in September last year.

Indian companies have bid aggressively for coal blocks in the country’s first auction.

GMR Chhattisgarh Energy, Reliance Cement, Sunflag Iron and Steel, CESC, Hindalco Industries, Jaiprakash Associates and BALCO are among the companies that bagged 11 coal mines in the previous four days of auction.

Meanwhile, according to India Ratings & Research (Ind-Ra), developers are quoting negative final price offers in the reverse auction process, for coal blocks earmarked for the power sector, implying zero fuel cost pass-through.

While this is beneficial for the end consumers and the state governments, the same has the possibility of negatively impacting the financial profiles of the developers.

In the reverse bidding, the government sets a ceiling price, which represents the coal cost of Coal India, and the bidders are required to bid lower than the ceiling price. The bidder which has the bid the lowest gets the mine.

The last day for the auction of first lot of mines is February 22.

 

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