Chairing a recent high-level inter-ministerial committee meeting to examine the bidding parameters suggested by the concerned ministries and Crisil, coal secretary SK Srivastava said that too many small companies joining hands to form a consortium would render operations difficult.

To bolster his contention he cited a recommendation of the finance ministry, which had earlier suggested that in the model concession agreements for the infrastructure sector the size of a syndicate should be restricted to six companies.

“In fact, the preferred option should be to have a consortium of six firms wherein each member should hold a minimum of 20 per cent stake each while the lead member must have 26 per cent participation,” an official, who attended the meeting quoted him as saying.

Other participants in the meeting, including DIPP secretary Saurabh Chandra, power secretary P Uma Shankar, Central Electricity Authority top brass and Coal India chairman S Narsing Rao are understood to have agreed to these suggestions. The meeting was unanimous on existing end-use projects (EUPs) having captive blocks should not be barred from bidding for fresh blocks since the bidders would be willing to pay the market price for the block an there is no need for rationing or restricting them.

The IMC decided that the net worth of the bidder should entail his equity part of the capex of the EUP along with the floor price of the bid as well as his financial ability to ensure development cost of the coal block.

At the behest of Srivastava, the meeting concurred that the consortium should be allowed between bidders each of whom meet the proportionate qualifying criteria on their own. This is because if a consortium is allowed to be formed by only relying on the financial strengths, then this would open the doors for financial companies which may not have exposure to end use plants. Therefore, along with having financial muscle for setting up plants the firms or syndicates should have the requisite wherewithal to engage into coal mining.

The IMC also concluded that there is no need for multi-layers stages for in the bidding process which would essentially involve expessions of interest, request for qualification and request for proposal (RFP).

Instead, there should be a single stage entailing RFP along with the pre-qualifying criteria. Arguing for the single stage, the meeting contended that EoI is unwarranted as it is done to ascertain the bidder’s interest.

The IMC decided that a bidder can allowed to exit the coal block because he would have already paid the value of the block upfront while the coal can only go to the stipulated EUP. However, the payments made by the bidder may not be recoverable by it except in relinquishment due to law and order problems (extremist activities), which would be assessed in view of any given situation.

“There needs to be disincentive so that the bidder does not find reasons to relinquish or not develop the block,”the IMC argued.

New rules

* Each member should hold a minimum of 20% stake and the majority partner of the syndicate should have a stake of at least 26%

* Consortium should be allowed between bidders each of whom meet the proportionate qualifying criteria on their own