Less Than Half of India Coal Mines Sold in 2015 Start Production

  • Only 11 of 26 mines auctioned operating as of May: CAG
  • Auctions need clear guidelines for evaluation of bids

Less than half of the coal mines auctioned in India in March 2015 have started operating, while the others are still awaiting approval from the state and federal governments to start production, the country’s federal auditor said in a report Tuesday.

Of the 26 mines that were handed over to the winning bidders, only 11 had started production as of May, the Comptroller and Auditor General of India said in the report, citing coal ministry data. 

The auctions, which were introduced for the first time last year, were aimed at raising transparency and were a shift from the earlier norm of discretionary allocations by the coal ministry.

The auditor said the auctioning process needed to be improved, with clear guidelines for the evaluation of price bids by companies, referring to the cancellation of three winning bids. 

The coal ministry canceled the winning bids of Jindal Steel & Power Ltd. for two mines and another by Vedanta Ltd. unit Bharat Aluminium Co., saying the bids were lower than the prevailing trend.

The auditor also criticized a government rule barring power companies from recovering the costs of acquiring the coal, saying it raised the risk of non-compliance with contract obligations and production schedules. 

Power generators, including Adani Power Ltd., Jaiprakash Power Ventures Ltd. and Monnet Ispat & Energy Ltd., paid premiums to win the coal mines in a desperate bid to secure fuel for their plants. Monnet has petitioned the Delhi High Court saying bidders weren’t informed of the rule at the time of the bids and has offered to relinquish the block.

Of the seven mines that were handed over to power producers, only three have started production, according to the report.

    Before it's here, it's on the Bloomberg Terminal.