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Saturday, December 31, 2011

India to allot coal blocks on power tariff basis

Saturday, 31 Dec 2011

ET reported that Indian power companies will get coal blocks only if they quote low tariffs, a move that is expected to revive investment in the sector and protect consumers from spiraling electricity rates.

A top mines ministry official said blocks earmarked for the power sector will be given to states which will have to invite tariff based bids for electricity supply and than the states, in consultation with the power ministry, will then recommend allocation of blocks to the lowest bidders to the coal ministry.

The official said "This decision has been taken after the power ministry insistence to avoid a spike in retail electricity tariff. Since January 2011, power companies have to participate in tariff based bidding to bag state electricity contracts. Companies would have quoted higher tariff if coal blocks came at a high cost."

The government plans to auction 51 coal mines with 18,600 million tonnes of reserves after a gap of three years.

The official said cement and steel companies will have to participate in a two stage bidding process that will be based on upfront payment.

The mines ministry will notify the auction by competitive bidding of coal mines rules, 2011 once they are vetted by the law ministry. It expects aggressive bidding for the mines as overall coal deficit is likely to increase to 238 million tonnes by 2016-2017 from the present 53 million tonnes.

The government is already planning steps to cap electricity tariffs of companies that have secure supplies from Coal India or captive mines.

(Sourced from ET)

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