New coal auction norms to discourage cartelisation

The government has tweaked the norms for the upcoming coal block auction to accommodate more bidders at the final bid phase, but has stopped short of accepting the demand for rejecting multiple bids from same group.

Following the auctions of Schedule 2 and 3 blocks, there was a growing clamour, mostly from unsuccessful bidders, demanding that there should only be one bid from one industry group to ensure that multiple bids from same group outfits, all acting in a possible cartel, do not crowd out others.

According to earlier norms, only 50% of the initial bids are allowed to qualify for final round. There were cases of multiple initial bids from same groups like Hindalco and UltraTech from KM Birla group or Balco and Sterlite under Vedanta group putting high bids for same set of mines which ensured that other serious players lost out.

Now, under new norms, if the number of qualifying bids have multiple bids from same group, then the next best bid would be considered even though it might fall under the cut-off 50% mark.

“If two qualified bidders are the same company (or group) and have submitted distinct initial price offers, then technically Qualified Bidders at next 1 rank shall also be declared as Qualified Bidders,” the standard tender document for the e-auction said.

To effect the new norm, the tender has introduced a concept of “Distinct Qualified Bidders” who are the bidders from the same group.

“In the event that qualified bidders are the same company or corporation or the qualified bidders belong to the same group and they have submitted distinct initial price offers, then the technically qualified bidders at next such number of ranks which shall be equal to total number of ranks held by such qualified bidders in the first 50% of the ranks minus number of distinct qualified bidders, shall also be declared as qualified bidders,” the new norms mentioned.

The possibility of multiple bids from same group crowding out other serious players rose when groups like Vedanta came up with 25 bids for 14 producing blocks or K M Birla group registering 15 bids for eight blocks.

What’s more, there were cases of multiple bids from same company under separate bidder’s registration numbers.

This new change in norms following feedback received from the initial rounds is the reason the government couldn’t conduct the third phase in March as promised.

In another change in norm, which is to discourage non-serious players, bid security of the qualified bidder who has submitted the highest initial offer would be forfeited if that bidders fails to bid in the second round, and no other offers are made resulting in cancellation of the auction.

The time to be taken to conduct the auction has been raised to 64 days from earlier 59 days. It would now take 114 days to issue vesting order, to be done on September 30 against just 88 days, to complete the whole process.

http://www.dnaindia.com/money/report-new-coal-auction-norms-to-discourage-cartelisation-2094035

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