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Companies are Starting to Feel the Heat of Negative Price Bidding for Coal Blocks

News

Exorbitant bids at the recently concluded coal auctions may be coming to haunt those who won. Mandakini Exploration and Mining, unlisted and 27% owned by Monnet Ispat and Energy Ltd, could be one of them.

Source: live mint

SNP Insight

The companies who have bidden negative price in the reverse bidding auction for coal blocks are going to feel the risk of economic viability of their projects. With regulatory cap on the fixed charge of tariff, it is hard for companies to recover the expense on fuel. So, it may expose these projects to higher risk and make these projects unviable.This may force many companies to surrender their coal blocks. And may result in reduction in domestic coal production and investment to the sector. Also this may affect future coal block auction process and income of government.    

Source: SNP Infra Research