India to auction coal blocks

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NEW DELHI, Jan. 3 (UPI) -- The Indian government for the first time is offering coal blocks for exploration by auction.

The competitive bidding process for the 17 coal blocks will be open solely to Indian state-run companies, the Ministry of Coal said.

In November, a ministry directive barred government companies from forming joint ventures with private enterprises for coal block licenses, Platts news service reports.

The government hasn't awarded any coal blocks during the last three years.

Previously, state-owned and private companies were allocated coal blocks based on the recommendation of a screening committee set up by the ministry, a procedure that was criticized for its lack of transparency.

Government companies participating in the auction will be accessed on qualities including their financial capabilities, previous track record in coal exploration and proximity of the end-use project to the coal block, a coal ministry official told Platts Wednesday.

India has the fifth-largest coal reserves in the world.

Indian state auditors in a report last year said that the country lost $33 billion allotting coalfields at below market rates in the years up to 2009.

That report said that of 86 coal blocks, which were to have produced coal by 2010-11, only 28 had started production by the end of March 2011. Of those, 15 were allocated to private companies.

In the ensuing "coalgate" scandal, Indian police carried out raids last September in 10 Indian cities as part of an investigation into alleged corruption in the allocation of coalfields.

State-run Coal India, which produces about 80 percent of the country's coal, has been criticized for insufficient production to meet demand and for mismanaging the country's resources.

From March 2008 through March 2011, the auditors' report said, Coal India failed to supply 54 million tons of coal that it had promised to power generation firms.

The report also cited a lack of infrastructure, such as railways, to transport coal from mines to power plants.

Coal accounts for about 67 percent of total energy consumption in India but as India's energy demand outpaces supply, power outages and blackouts are becoming more frequent, particularly amid coal shortages.

In July, India endured two days of massive blackouts that left more than half of the country without electricity.

The International Energy Agency, in its annual "Medium-Term Coal Market Report" released last month, predicts that India will become the second largest coal consumer and the largest seaborne coal importer by 2017, surpassing the United States.

The Indian government has said that the country would need to import 185 million tons of coal annually by 2017 to meet increasing shortfalls. By contrast, 2011 imports reached around 90 million.