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Government allows sale of 25% coal from captive mines in open market

Government allows sale of 25% coal from captive mines in open market

On Tuesday, 19th January, 2019 the government allowed the sale of 25% of coal of its total production from the captive mines in the open market. This is done to increase competition and make future allotment attractive. However, this sale will be possible with an additional premium charge.

THE CHANGE

Earlier, the owners of the mines  to sell the coal in the open market and had to use it for self-consumption. However, during the meeting of the Cabinet Committee on Economic Affairs it came to an conclusion that the companies could sell 25% of the coal. Also they had to utilize the rest 75% of its actual production on ROM basis (Run on Mine). This coal would be sold on an additional premium of 15%.

VALUATION OF ADDITIONAL PREMIUM

1. In case of auction.
In the case of a successful auction, the bidder will have to pay an additional premium of 15%(per tonne) of the final bid price.

2. In case of allotment
In case of an allotment, the allottee will have to pay an additional reserve price of 15%. It is of the reserve price of the quantity sold in the market.

Both the premium and reserve price are calculated over and above the final bid/reserve price.

NEED FOR THE CHANGE

In the year 2017, during the 5th round of coal mine auction, the government got a very poor response from the bidders. As a result of which, they identified the need to sell coal in the open market. This move will not only increase competition but also improve direct and indirect employment in coal bearing areas. Due to which, there will be an increase in economic development. Subsequently the government will be in a position to generate greater revenues.

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