Revenue sharing methodology applied for auction of coal/lignite mines

May 20: The Cabinet Committee on Economic Affairs, chaired by Prime Minister Shri Narendra Modi, has approved the methodology for auction of coal and lignite mines/blocks for sale of coal/lignite on revenue sharing basis and increasing the tenure of coking coal linkage.

This methodology provides that the bid parameter will be a revenue share. The bidders would be required to bid for a percentage share of revenue payable to the Government. The floor price shall be 4% of the revenue share. Bids would be accepted in multiples of 0.5% of the revenue share till the percentage (%) of revenue share is up to 10% and thereafter bids would be accepted in multiples of 0.25% of the revenue share. There shall be no restriction on the sale and/or utilization of coal from the coal mine.

The methodology is oriented to make maximum coal available in the market at the earliest and it also enables adequate competition which will allow the discovery of market prices for the blocks and faster development of coal blocks. Higher investment will create direct and indirect employment in coal-bearing areas especially in the mining sector and will have an impact on the economic development of these regions.

Successful Bidder shall be required to make monthly payments which shall be determined as product of:

  1. percentage (%) of revenue share (final bid).
  2. quantity of coal on which the statutory royalty is payable during the month.
  3. national price or actual price whichever is higher.

The Upfront Amount shall be 0.25% of the value of estimated geological reserves of the coal mine payable in 4 equal installments.

It also permits commercial exploitation of the CBM present in the mining lease area.

This methodology provides incentives to the successful bidder by way of offering rebates in revenue share in events of the early production of coal from the coal mine and the total quantity of coal consumed or sold or both for gasification or liquefaction every year from the coal mine.

As the entire revenue from the auction/allotment of coal mines would accrue to the coal bearing States, this methodology shall incentivise them with increased revenues which can be utilised for the growth and development of backward areas and their inhabitants including tribals. States in the Eastern part of the country will be especially benefited.

Tenure of coking coal linkage in the non-regulated sector linkage auction has been increased up to 30 years.