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Hindalco wins Gare Palma-IV/5 mine in Chhattisgarh

Business Standard:  February, 2015

New Delhi: For companies bidding for coal blocks in the ongoing e-auction, the mineable capacity is not the only criteria for bidding. Attached infrastructure, rail and road connectivity and topography is playing a huge role in some blocks fetching attractive bid prices.

Late night on the fifth day of auction, Gare Palma-IV/5 in Chhatisgarh received a final bid of Rs 3,502 per tonne from Hindalco Industries — the highest so far. This price is also higher than the current landed price of imported coal that is Rs 3,000 per tonne. The capacity of the block is decent at 42 million tonnes per annum and its end use is steel production. As it was kept for the unregulated sector, there was forward bidding for it. The block had also received the highest floor price till Wednesday at Rs 2,050 per tonne. Among the most attractive features is the steel manufacturing infrastructure built by the prior owner, Monnet Ispat Pvt Ltd. The plant also has attached to it a 3.5 Mw captive power production plant. The other major benefit associated with this mine is the coal evacuation plan. The rail and road connectivity is quite close compared to several coal mines in difficult terrains. The nearest rail head distance is 40 km but the nearest highway is 25 km. The mine is close to Raipur airport as well.

The mine has good hydrography too. While the Kelo river runs towards the west of the mine, there are local surface drainage channels that collect water from slopes of the terrain and discharge in Kelo River.

This mine will earn the state of Chhatisgarh Rs 2,263.8 crore over the life period of the mine i.e. average 25 years. Out of this, Rs 350 crore is the annual revenue generated from the auction and Rs 1,485.8 crore over the whole life of the mine. The state government would also get an annual royalty amount of Rs 18.34 crore, which translates into Rs 778 crore over the whole life.

The other bidders in the fray were Ambuja Cements, Sesa Sterlite, Sarda Energy, Rungta, BALCO and Monnet Ispat. Hindalco had put in two bids for this mine and so had BALCO. After a fight that ran for more than 12 hours, the auction saw Hindalco emerging as the winner with a record final bid.

The government is re-allocating the coal blocks cancelled by the Supreme Court ruling in August last year. The e-auctions of 42 coal blocks started from Feb 14 and will run till March 3.