The coal ministry is at an advanced stage of discussion for firming up terms and conditions for coal auction with 100 percent commercial mining provision, sources told CNBC-TV18. The ministry recently concluded auction of 6 coal mines out of 27 offered with a provision to sell 25 percent of coal in the market.

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Earlier, the auction for coal mines was conducted on fixed price on rupees per tonne basis. Now the ministry plans to bring in revenue sharing basis. The sources indicate that reserve price shall be 4 percent of the value of coal dispatched by the bidder and an equal amount to 2 percent of the intrinsic value of coal mines will be submitted as bank guarantee. The company which wins the bid will have to make an upfront payment equal to 2.5 percent of the intrinsic value of the coal mine in 4 equal instalments. Bidders will have to bid in the multiples of 0.05 percent of revenue share, over and above the reserve price.

Any company which has earlier been allocated coal mines will have to clear all its dues to participate in the coal auction for 100 percent commercial mining. There’s also a clause which will restrict participation if a company is convicted of any offence related to coal block allocation and if culprits were imprisoned for more than 3 years.

The coal mine auction for 100 percent commercial mining will have no restriction of sale or utilisation. The company can even export the coal out of India. Mines allocated under auction for 100 percent commercial mining will also have flexibility to manage its production depending on market scenario and will also be allowed to reduce production below peak capacity.