The Ministry of Coal has sought comments and suggestions from stakeholders with regard to its draft Request for Proposal for development of coal blocks proposed to be allocated through auction by competitive bidding under the Auction by Competitive Bidding of Coal Mines Rules, 2012.
In an attempt to improve the long term availability of coal in the country, the Ministry of Coal proposes to select entities engaged in end uses such as steel, cement, sponge iron and surface gasification for allocation of coal blocks through auction by competitive bidding. The coal produced from an allocated coal block can only be used for captive consumption in the approved end use plant.
As per the draft RfP document, for selection of the preferred bidder for allocation of a coal block, the Ministry of Coal will adopt a single-stage, two envelope process. A bidder has to submit the bid in two parts. The first part includes the techno-commercial offer and the second the price offer in accordance with the provisions of the RfP. The bids received by the due date will first be checked for responsiveness to ensure that all necessary documents have been submitted. The bids passing the responsiveness check will be further evaluated as per the qualifying requirements laid down in the RfP. The price offer of only qualified bidders will be opened. The price offer has to be quoted in Rs. per tonne. The preferred bidder will be the one that quotes the highest Rs. per tonne. The remaining bidders will be kept in reserve and may be invited to match the highest bid in case the highest bidder withdraws or is not selected for a reason. If the highest bid is not matched, either fresh bids will be invited from the remaining bidders or the bidding process annulled. On selection of the preferred bidder, the Letter of Award will be issued. The preferred bidder has to sign the Coal Mine Development and Production Agreement within 45 days from the date of issuance of the LoA through the mine allocatee. The bid will be valid for a period not less than 180 days from the bid due date.
The draft RfP document lists the qualifying requirements for a single entity bidding individually and entities bidding in a consortium. In the first case, for existing and operational end use plants, the bidder is required to have an operational end use plant with unmet coal requirement above and beyond the sum of coal linkage provided by Coal India Limited and production capacity from any captive blocks already allotted to the specific plant. The bidder will need to prove the unmet coal requirement. The unmet requirement of coal will be computed as total requirement of coal at 80 percent capacity utilization of the end use plant less the sum of the peak production from any captive coal block allocated previously and the linkage of coal from Coal India Limited or any of its subsidiaries. The bidder is allowed to only bid for the coal blocks that have an estimated peak production capacity such that the peak production from the new block when added to the bidder’s domestic coal availability through the earlier allocation of captive block and linkage does not exceed 80 percent of the requirement for the identified end use plant. The bidder needs to have a minimum net worth equal to the sum of the upfront payment payable as per the Coal Mine Development and Production Agreement plus the anticipated cost of developing the mine until start of production.
In case of new end use plants not yet commissioned and expansion of existing end use plants, the bidder has to prepare a Detailed Project Report for the specific plant and the DPR cannot be more than one year old from the bid due date. The bidder also needs to have an environmental clearance from the Ministry of Environment and Forests. The EC is not required for surface gasification end use plants. For integrated steel, sponge iron and cement projects, the bidder has to achieve financial closure for the new end use plant or expansion of the existing end use plant, as the case may be. For a surface gasification project, the bidder has to complete the technology tie-up. In case of an integrated steel project, the bidder can only bid for the coal block if the coal block has a peak production capacity which does not exceed 80 percent of the bidder’s coal requirement for the identified end use plant. For a sponge iron or a cement project, the bidder can only bid for the coal block if it has a peak production capacity not exceeding 80 percent of the coal requirement for the identified end use plant and the captive power plant required for the identified plant. The bidder also needs to have a minimum net worth equal to the sum of the equity portion of the capital cost of the end use plant plus the upfront payment plus the anticipated cost of developing the mine until start of production.
For entities to bid in a consortium, the number of entities in the consortium cannot be more than four. Each consortium needs to identify a lead member who cannot be changed during the bidding process. The share of each member in the consortium has to be minimum 20 percent and that of the lead member minimum 26 percent. Each member will have to meet the qualifying requirements laid down for single entity bidding individually, prorated to its share in the consortium.
