Floor price of Rs 150/tn for coal auction good: Sarda

Written By Unknown on Kamis, 18 Desember 2014 | 21.03

GD Mundra, Director, Sarda Energy in an interview to CNBC-TV18 said with their company now coming under the power category according to the approach paper for coal auction released by the coal ministry,  the bid price of Rs 150 per tonne sounds very reasonable. He does not expect aggressive competition at this price point.

The approach paper states there would be two methods of bidding for auction of coal blocks – one, forward bidding for unregulated sectors like steel, cement and captive power where Rs 150 will be the floor price for bidding. Two, reserve bidding for specified end use for power generation where Rs 100 per tonne will be the floor price.

There is unlikely to be aggressive bidding mainly because the bidding will be done as per requirements and will be done only for particular mines.

According to him the whole exercise of coal block auction by the government was not focused on generating revenue but availability of coal.

The company's mines had total reserves of 56 million per tonne out of which only 4 million tonne has been mined, says Mundra.

Below is the verbatim transcript of GD Mundra's interview with Reema Tendulkar and Sumaira Abidi on CNBC-TV18.

Reema: Can you walk us through the reserves at your mine, what was the total production, how much was used and how do you read this floor price of Rs 150 per tonne?

A: This paper which is now released by the government is giving more clarity about the forward bidding and reverse bidding and basically for the end-use which is iron steel and cement, and reverse bidding only for power generation.

Earlier we were not clear whether we will fall in power or in steel bracket because we had power for captive and sponge iron for steel. Now we are clear that we will fall under power for bidding, where the floor price is Rs 150 per tonne.

The government has kept the floor price at a very reasonable level. We will have to see at the time of bidding; successful bidder will have to top it up. So it is giving more clarity giving a definitive time schedule and various eligibility criteria and the mines will be categorised based on the reserves available and each one will have to bid based on his requirements for maximum 30 years.

So there is a two stage eligibility criteria - technical as well as financial criteria. Once you pass through that technical qualification then bidders will be allowed to bid for the price and be a successful bidder.

Sumaira: Your mine had a capacity of 56 million tonnes so what are the reserves there and what would be the quantum that you would have to pay to rebid for it?

A: Our mines have reserve of 56 million tonne and out of that we have already mined about 4 million tonne. Based on this, we will have to work out the how much NPV. We are just in the process of working out and we will come to know how much we will have to bid for those mines.

Reema: Gare Palma IV/7 has reserves of 50 million tonne?

A: Yes.

Reema: How aggressive do you think the bidding will be because as you said the floor price according to you appears a bit reasonable, do you expect the bidding, the final price at which the mines are cleared is going to be significantly higher than the floor price, what is your reasonable assumption? How high are you willing to go to bid for your existing mine, would you go to Rs 300 per tonne also, give us some sense?

A: That is very difficult to tell at this point in time because the government has made it very clear that this is not a revenue generating and they don't want the ultimate product which will be generating out of this coal to have the higher cost. Therefore, they are keeping it reasonable.

Over and above what I can see from the guideline that each bidder will be eligible to bid for only a particular mine. Bidder will not be allowed to bid for a multiple mines. So there will not be much competition in that way. The government is trying for reasonability even when it is going for a bidding process and then existing mine owner can plan it in a better way.

We are going through the guidelines and its minute details, I think the clarity will come in a day's time.

Sumaira: You had already accounted for Rs 107 crore in terms of penalty so the remaining amount that you now have to pay for the rebidding, how are you going to provide for that and will it be like a one-time payment or will you have to make an annual payment?

A: I think 10 percent of the NPV, they expect as one-time payment and then each tonne you produce that is what we have to top it up with about Rs 150 per tonne floor price. Whatever price we will be bidding will be applicable of 2015-2016 and thereafter every year it will be revised.

Reema: There are also some key conditions which have been highlighted in the approach paper, a bidder cannot bid for a coal mine more than 150 percent of its requirement either individually or via a joint venture and secondly, any surplus coal extracted beyond the annual requirements will be sold to Coal India at the bid price or the Coal India notified price as the case maybe, your thoughts on these two conditions which have been imposed, how should we read it?

A: That is very good because you cannot bid for more than your requirement. There will not be much competition and the government doesn't want undue competition.


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