Enhancing Coal Production –
Advent of Real Competition
November 2013
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Imperative for successful business model in Coal Mining
Maximise interest of all stake holders
thru’ Competitive Bidding
thru’ Price Control
thru’ reasonable return & incentive
for enhanced production
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Pitfalls in Captive Coal Mine (CCM) Auctioning
• No guarantee that power producers will be the most efficient while bidding for sale of
power
• Coal Block may remain unutilized till such time PPAs are awarded
• Coal production may not be optimum and constrained by the demand from its power
plant
• Cost plus days are gone.
• Sale of Power is thru’ Competitive Bidding
• Developer may keep the most of benefit of having a low cost mine to himself
• Under the new power procurement guidelines, no segment for CCM obtained thru’
auction basis
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Modified MDO
Government
Coal Mine
Auctioned to Bidder
quoting Maximum
Premium / Revenue
Share subject to
supplying to
specific users at
pre-determined
price
Private Player
Responsible for development of
mine, extraction and selling the
output
Allowed to sell to specified user(s) at
a pre-determined pricing formula for
output approved as per plan;
Additional output may be sold in
open market or designated Consignee
End User
• Mine ownership with Govt; Successful bidder gets control on Economic value of Coal during the
Concession Period; End users to be determined by Government from time to time
• MDO term to be Long Term as it is a Mining Concession
• Stringent Technical Qualification requirement to ensure quality and productivity
• Higher production to be incentivized at import parity price
• Adjustment factor for change in actual quantity
/ quality if materially diff. from tender estimates
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Thank You
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