The Economic Survey 2018 voiced concerns on the aggressive bidding submitted by companies for bagging licences for spectrum, coal mining and solar and wind projects.
“In the case of spectrum, coal, and renewables, auctions may have led to a winners’ curse, whereby firms overbid for assets, leading to adverse consequences in each of the sectors; but they created transparency and avoided rent- seeking with enormous benefits, actual and perceptional,” said the survey tabled in Parliament by finance minister Arun Jaitely on Monday.
Companies have put in aggressive bids for bagging captive coal blocks but after mass cancellations of coal mining licences by the Supreme Court in 2014, banks are concerned over the viability of the low solar and wind power tariffs quoted by companies to bag contracts.
The country has recorded lowest solar power tariff of Rs 2.44 per unit after which the prices have risen marginall. Wind power tariffs in the country dropped to a low of Rs 2.43 per unit in 500 mw reverse auctions conducted by Gujarat Urja Vikas Nigam Ltd in December last year. The striking drop in wind power tariffs is being looked at as a matter of concern by the wind industry.
Of the eight power companies that were allocated coal blocks, five have moved to court to challenge the government’s decision to disallow pass through of quoted discount on coal cost on final power tariff.The companies bid aggressively to forego their mining costs for inclusion in tariff calculations.
Over 40 captive blocks were producing close to 40 million tonnes before the Supreme Court cancelled all licenses in 2014. Now the production is about 16 mtpa as a number of blocks once operational are yet to resume mining due to legal issues and lack of green clearances.
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The government has set up a panel headed by cabinet secretary P K Sinha along with secretaries of power, coal, steel and top officials of several other ministries to look in to the reasons for low coal output from captive coal blocks and mull various options to raise their production.
ET had on December 25 reported that the government is considering shifting to a production or revenue sharing model similar to the bidding of oil blocks for coal blocks. The coal ministry has set up an expert panel headed by former CVC Pratyush Sinha to examine challenges of the current bidding system and suggest changes for conducting future auctions of coal mine.economictimes