By Shri Kapil Mantri, EA to Chairman, Jindal Steel & Power - Infraline

Captive Coal Blocks Bidding 

1 

Presented by – Kapil Mantri, Jindal Steel & Power

Flow of Presentation 

Jindal Steel And Power 

Coal In India 

Draft NIO 

Suggestions 

Way Forward 

2 

Copyright © 2011 Jindal Steel & Power Ltd. 

Proved Reserves, Source: Geological Survey of India, April 2010

3 

JINDAL STEEL & POWER LIMITED

Jindal Steel & Power Limited 

Jindal Steel & 

Power Ltd. / 

Jindal Power 

Ltd. 

Steel 

3 MTPA 

Iron Ore & Coal 

Mining 

15 MTPA 

Power 

Generation 

1,800 MW 

Machinery 

Work Shop 

‣ Market capitalization: USD 13 Bn 

‣ Revenue : USD 2.5 Bn 

‣ Cash Profit : USD 1.0 Bn 

4 


4

JSPL- Global Presence 

Gurgaon 

Hisar Delhi Faridabad Patratu 

Dongamahua Ranchi 

Ahmedabad Raigarh Kolkata 

Raipur Barbil 

Nagpur Tensa 

Angul 

Mumbai 

Bhubaneswar 

Hyderabad 

Registered Office 

Corporate Office 

Works 

Mines 

Marketing Office 

Branch Office 

Stockyards 

Chennai 

Bangalore 

Congo 

Georgia 

Oman 

India 

China 

Indonesia 

Zimbabwe 

Madagascar 

Mozambique 

Bolivia 

South Africa 

Australia 

Copyright © 2010 Jindal Steel & Power Ltd.

Coal resources in India 

17544, 

17% 

87797, 

83% 

Coking 

Non Coking 

• India has more than 105 billion tonnes of proven reserves 

• Excavation presents challenges ranging from Environment 

clearances to Rehabilitation 

6 


Proved Reserves, Source: Geological Survey of India, April 2010

India’s Coal demand growth 

India’s Coal demand will increase to ~1800mt by 2020 

Domestic supply is unlikely to keep pace with demand, shortfall is expected to 

be ~600mt in 2020 

7 


Source: Credit Suisse

India’s Coal demand growth 

Carrying Coal to 

New Castle?? 

India’s Coal demand will increase to ~1800mt by 2020 

Domestic supply is unlikely to keep pace with demand, shortfall is expected to 

be ~600mt in 2020 

8 


Source: Credit Suisse

Competitive bidding of Captive Blocks 

Step in the right direction…… 

• Ministry of Coal (MoC) intends to 

offer coal blocks through bidding 

route for captive mining of coal for 

permitted end use i.e. for steel, 

power and cement sectors 

600 

500 

400 

CIL production unlikely to meet 

demand 

• One of the potential solutions for 

helping to reduce Coal Supply Deficit 

in the Country. Will also reduce 

pressure on CIL. 

300 

200 

100 

0 

FY09 FY10 EFY11 EFY12 EFY13 EFY14 

• Draft Notice Inviting Offers (NIO) 

provides four options for bidding 

9 


Source: Newspaper reports, Internal Estimates

Draft NIO Overview 

Net Worth 

Option-1 Option-2 Option-3 Option-4 

Reserve Price 

tag + 15% of 

the value of 

its end use 

plants 

Fixed price tag 

+15% of the 

cost of its end 

use plant 

Reserve Price tag + 

15% of the value of 

its end use plants 

Fixed price tag +15% 

of the cost of its end 

use plant 

Earnest Money 

Deposit 

5% of the 

Reserve price 

tag 

20% of fixed 

price tag 

5% of the Reserve 

price tag 

20% of fixed price 

tag 

Evaluation 

Criteria 

Upfront 

payment 

Extractable 

reserve linked 

program 

Upfront payment 

(80) 

Status of plant (10) 

Capacity of plant 

(10) 

Upfront payment 

(80) 

Status of plant (10) 

Capacity of plant 

(10) 

10 


NIO Option - 1 

Upfront payment is the sole criterion for bid evaluation 

• Upfront payment of the bid amount in five installments. 

• All blocks offered for bidding shall carry "Reserve Price". 

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Extractable Reserve Linked Payment (ERLP) is the sole 

criterion for bid evaluation 

• Upfront payment of the "Fixed Price Tag" fixed by MoC in five 

installments + ERLP quoted by the bidder in INR/tonne. 

• ERLP = total envisaged life time production (in tonnes) as per 

approved mine plan (to be drawn and submitted by the bidder 

to MoC for approval) x per tonne rate (in INR) offered by the 

bidder at the time of bidding 

12 



Capacity & Status of the end use plant and upfront payment shall 

be given weightage in the ratio of 20:80 and overall score shall be 

the basis of final ratings of the bids 

• Upfront payment of the bid amount in five installments 

• All blocks offered for bidding shall carry "Reserve Price". 

• Highest 10 points to be given for the Highest capacity end use 

plant and proportionately for lesser capacities 

• Highest 10 points to be given for the end use plant which is 

complete and functioning and 5 points for plant under construction 

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The capacity and status of the end use plant and ERLPs shall be 

given weightage in the ratio of 20:80 for final ratings of the bids. 

• Upfront payment of the "Fixed Price Tag" fixed by MoC in five 

installments + ERLP quoted by the bidder in INR/tonne. 

• ERLP = total envisaged life time production (in tonnes) as per 

approved mine plan x per tonne rate (in INR) offered by the bidder 

• Highest 10 points to be given for the Highest capacity end use plant 

and proportionately for lesser capacities 

• Highest 10 points to be given for the end use plant which is 

complete and functioning and 5 points for plant under construction 

14 


Our Suggestions… 

1) Option No.4 appears to be better option 

The capacity and status of the end use plant and ERLPs shall 

be given weightage in the ratio of 20:80 for final ratings of the 

bids 

Without big financial burden at the time of allotment of the 

block - the parties will find it easier to make payment as the 

mining progresses 

15 



2) Coal Blocks should be offered for a specific end use plant. 

Different and varying requirement of Coal as well as the 

investments required in Iron and Steel, Cement & Power 

plants are 

Ministry of Coal should specify in the bid itself about the 

specific end use plant for which the Coal block is being 

offered. 

16 



3) A connection between the quality, consumption, requirement 

of coal and the size of coal block allotted is required 

- Higher capacity -> bigger block 

- Coking Coal -> Steel 

17 



4) To be allowed to bid and acquire for more than one block 

depending on the requirement of the end use Plants. 

In case a company has more than 1 project, for which it may 

want to own more than 1 blocks- draft policy document 

restricts it to one. 

A large number of Indian companies are very aggressive in 

capacity ramp up and simultaneously executing several 

projects. The policy shall not impede the momentum. 

18 



5) Experience of the bidder not valued?? 

Already alloted blocks are 

Slow in development 

Past experience in both Development 

and Operation of the bidder should 

be given certain points, for faster 

execution 

Should not delay the development 

19 Copyright © 2011 Jindal Steel & Power Ltd. 

Source: Crisil, Newspaper reports


6) Preference to be given to a company with end use plant in the 

same state as mine - for 5% of the points, subject to the 

company matching the Highest price – Should be increased to 

at least 10% 

Infrastructure Bottlenecks 

State should get its share – Mining Output Multiplier of 13 

20 


Commissioning of a typical mine takes 5-7 yrs 

21 


Commissioning of a typical mine takes 5-7 yrs 

Environment and Forest 

Clearance and 

Land Acquisition are the 

most time consuming and 

uncertain tasks 

22 



7) UMCM modeled on UMPP 

If MoC can acquire land and get Environment and Forest 

Clearance, following UMPP process – 

Reduction in development time for mine 

Lower Risks for the bidder 

And hence, higher bid for the government 

23 


Way Forward 

• Immediate action from the MoC to start 

• A word of advise for investors and bidders - 

Be Rational in bidding, taking into considerations the risks and 

time consumed in R&R, Land Acquisition, Environment Clearance 

Forest Clerance 

– Many projects which were won by aggressive bidding have still 

not seen light of the day. 

• Venture Abroad should continue 

• Similar mineral policy for other mines / resources 

24 



Thank you

By Shri Kapil Mantri, EA to Chairman, Jindal Steel & Power - Infraline

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