Even as the government is drafting rules to auction coal blocks, power firms have already started working on strategies to identify suitable blocks. While fierce competition is expected for blocks with higher coal reserves and infrastructure to transport the dry fuel, industry executives say there could be increased "cooperation" among companies and that some of them may form joint ventures to bag promising coal blocks.
On September 24, the Supreme Court cancelled the mining permits of 204 coal blocks allotted to captive users between 1993 and 2011. Operators of producing coal blocks have six months to return the assets to the government. Many of the blocks had been allotted to power producers. The government now aims to auction close to 200 blocks by the end of the current fiscal year through March.
"Producing blocks with existing and possible rail linkages to evacuate coal will be the most sought-after assets by bidders. Blocks having promising reserves too will command a premium, while bidders will not be interested in coal blocks that are located away from the end-use plants and need to deal with government and locals for tedious clearance process and rehabilitation," said an official with one of the firms that is planning to participate in the bidding process.
He said prior allottees of the blocks will have a tough time to secure the same assets due to competition, but will have an advantage since they have better knowledge about the blocks. An executive with another power project developer said the remaining life of producing blocks will determine the valuations as further coal mining may not be possible in certain blocks.
"Also, developers of producing blocks are mining even more coal as they have less than five months to return their assets," said the executive, who added that added that some of the previous owners may withdraw from the race.
Source: The Economic Times
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