India launches coal block auctions as earlier system discredited

NEW DELHI Wed Feb 26, 2014 7:03am EST

NEW DELHI Feb 26 (Reuters) - India has invited bids for three coal blocks containing reserves of about 499.4 million tonnes, the Coal Ministry said, in its first auction of mining rights following investigations into its earlier practice of allocating them.

The allocation controversy, dubbed "Coalgate", came up in 2012 after an auditor questioned the government's exercise of awarding mining concessions without competitive bidding. India's top investigation agency has already launched probes against industrialists and companies.

"The government has initiated an auction of coal blocks by inviting applications for the first time for allocating coal blocks through competitive bidding for specified end-uses," the Coal Ministry said in a statement on Wednesday.

Two of the coal blocks are located in the eastern state of Jharkhand and one in neighbouring West Bengal. The type of coal from the blocks would be used in the steel, cement and sponge iron industries, the statement said.

The ministry said in September that bidders would have to agree to milestones for obtaining environment and forest clearance permits and for developing the blocks.

Many companies that received coal blocks over the past decade had to give them up recently as the government found them slow to develop the blocks.

Difficulties in obtaining environmental approval and securing land for mining have made India the third-largest importer of coal, even though it sits on what BP ranks as the fifth-largest reserve. State-run Coal India is the dominant producer but frequently fails to meet targets. (editing by Jane Baird)