Investors fret as India defends reopening coal mine bids

New Delhi: The coal ministry said it will decide this week the fate of nine winning mine bids it is re-examining to rule out any price discrepancies, despite criticism that its move to reopen some of the tenders will hurt business sentiment. The government, which last month started auctioning off coal mine sites after the Supreme Court said a previous method of awarding concessions was illegal, is re-examining "outlier" bids for the 33 mines auctioned so far, Coal Secretary Anil Swarup said.

The winning bids for the nine mines were the highest in their individual auctions, but were considered low when compared with the winning bids for other similar blocks. "We are not even looking at somebody doing wrong," Swarup told Reuters on Tuesday. "We are looking at whether the price that was quoted is good enough for the government or not, and whether we could get a better price."

Swarup said if any discrepancy is found, the mines may be re-auctioned, given to states or handed over to government-owned Coal India Ltd. This has left some companies, including Jindal Steel and Power Ltd, uncertain as to the status of what had appeared to be winning bids in the auctions. Shares of Jindal Steel, controlled by billionaire Naveen Jindal and which had placed the highest bids for two of the blocks under question, fell as much as 18 percent to a month-low on speculation it would not be awarded the mines.

Jindal Steel had offered to pay 108 rupees ($2) per tonne in the auction for two adjoining blocks it had held previously, the lowest winning bid among the first few blocks meant for the power sector. Bids are typically based on estimated tonnage in the mines and quality of coal available. Bids on other blocks in the power sector had ranged as high as 1,100 rupees per tonne. Jindal Steel officials could not be reached for comment.

"It's a flawed argument to say that blocks may not be given because the bids are too low," said Niladri Bhattacharjee, director of infrastructure, government and energy at KPMG Advisory Services. "There is no question of too low or too high once they have already decided the reserve price (of 100 rupees per tonne)," he said. Others have said that reassessing the auctions after the posting of the highest bids sends the wrong signal to the market. Swarup, however, said the government has the right to examine bids by comparing the value for mines that have a similar quality and quantity of coal. "You can't take away the right of the government to examine an outlier. If we don't do that, there will be questions," he said.