'Our whole concept of coal mine allocations is wrong'

[Guynextdoor2]

That argument that customers will have to pay a heavy amount has not been found to be true after the telecom auctions. There has been no outrageous increase in prices. Nor have they been seen in reverse auctions of coal for power plants. In any case why should the people of India subsidise the end user of any product especially since it remains very non-transparent. Let the users pay if it does come to that or buy coal from abroad as many did. The fact that they find coal mines attractive here suggests differently from your argument.

Btw, the argument on electricity tariffs is a bogus one. When giving to private producers, there is no guarantee that the entire benefits will be transferred & the auctions have actually forced tariffs downwards. Production hasn't been made costly, probably more efficient. In any case, there was nothing the government could do except to formulate the auction rules. the rest was decided by an order of the Supreme Court.

You have no understading of the telecom auctions. The basic telephony licenses were given fee basis, therefore basic telephony rates are low. 'Value Added' services beyond basic telephony went on auctions because they were not 'basic services' and not 'essential'. The rationalized structure- basic call rates are therefore low- 1 paise per minute. Tell me which other service is low? 3G was auctioned at $15 B and rarely come for less than 1000 per customer per month. Which poor person can afford a 3G or 2 G service? And how electricity mysteriously different? Coal prices have the same impact on an economy that oil prices have. Oil affects transport, coal effects household electricity.

 

[wolfschanzze]

The Government also has a clause of capping the electricity rates charged by Power producing units,so that they cannot fleece the common man to get back the money they spent in buying that block.

Clause 3.1 of the draft bid documents for coal blocks auction prohibits change in composition of a joint venture bagging a coal block while clause 3.6.6 (b) discourages companies from withdrawing from auction once they qualify in the first stage. Coal block allottees cannot transfer mining lease as per clause 3.10 of the bid documents.

A top official in the coal ministry said prohibition of change in joint venture composition or mining lease was necessary to prevent misuse of coal and profiteering by companies, but experts said the clause does not provide for mergers or acquisition.
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Coal block auction: Government likely to cap costs of power plants

Coal block auction: Government likely to cap costs of power plants - The Economic Times
NEW DELHI: The government plans to cap costs of power plants that can be passed on to electricity consumers, to prevent rise in tariffs as all power firms have agreed to forego mining costs for winning the blocks.

The move will hit power firms as they will have to absorb the mining costs throughout the life of the block and will not be able to pass on the high coal costs under different heads.

Companies said the move was unfair and the government should have indicated such plans before coal block auctions. The government had earlier said it will revise existing power contracts between generating and distribution companies to lower electricity tariffs from plants that will run on coal from auctioned captive blocks.

It now plans capping the fixed costs of the plants to prevent tariff increase in new contracts as most companies that have won the mines with aggressive price bids do not have power purchase agreements (PPAs).

Through the move, the government is ensuring that companies do not pass on the burden of high coal cost in new PPAs. "We are pretty clear that the companies will not be able to smuggle the costs to tariffs," a senior government official said requesting anonymity. The power ministry may issue advisories to the state power distribution companies to check the tariff pass through when they call for the bids. As per the norms, the companies which won the blocks will have to sign PPAs with distribution utilities to be able to mine the coal.

The government has already made it clear that the existing PPAs will be re-opened to bring down the tariff, the official said. The power ministry is soon expected to issue advisories to the state and central electricity regulatory commissions to revise the existing PPAs. The government is also amending the National Tariff Policy to enable the electricity regulatory commissions to open the legally binding PPAs to revise the fuel cost

Section 63 of the Electricity Act, which relates to tariff-based competitive bidding, limits the role of electricity regulators to adopting the tariff and notvetting. "The government is exploring ways to pass on benefits of low coal cost to consumers. The government can revise the tariffs downwards under the change of law provision in the PPAs," another government official said.

That argument that customers will have to pay a heavy amount has not been found to be true after the telecom auctions. There has been no outrageous increase in prices. Nor have they been seen in reverse auctions of coal for power plants. In any case why should the people of India subsidise the end user of any product especially since it remains very non-transparent. Let the users pay if it does come to that or buy coal from abroad as many did. The fact that they find coal mines attractive here suggests differently from your argument.

Btw, the argument on electricity tariffs is a bogus one. When giving to private producers, there is no guarantee that the entire benefits will be transferred & the auctions have actually forced tariffs downwards. Production hasn't been made costly, probably more efficient. In any case, there was nothing the government could do except to formulate the auction rules. the rest was decided by an order of the Supreme Court.

See here the Government is fixing the price the PPP power producing units can charge,
The government plans to cap costs of power plants that can be passed on to electricity consumers, to prevent rise in tariffs as all power firms have agreed to forego mining costs for winning the blocks.

Coal block auction: Government likely to cap costs of power plants - The Economic Times

 

[Guynextdoor2]

The Government also has a clause of capping the electricity rates charged by Power producing units,so that they cannot fleece the common man to get back the money they spent in buying that block.

.

I have seen many many lame things but this is the lamest. The companies will not recover the money for auctions from customers. Obviously they're in this for charity

 

[Bang Galore]

You have no understading of the telecom auctions. The basic telephony licenses were given fee basis, therefore basic telephony rates are low. 'Value Added' services beyond basic telephony went on auctions because they were not 'basic services' and not 'essential'. The rationalized structure- basic call rates are therefore low- 1 paise per minute. Tell me which other service is low? 3G was auctioned at $15 B and rarely come for less than 1000 per customer per month. Which poor person can afford a 3G or 2 G service? And how electricity mysteriously different? Coal prices have the same impact on an economy that oil prices have. Oil affects transport, coal effects household electricity.

Ya, obviously I'm not the only one who doesn't understand your idea, I'm in good company of the Supreme Court & CAG. I prefer that we now have the money in government coffers rather than in the financial statements of the telecom companies. How you defend a non-transparent allocation of a national resources is best understood by you. First come, first serve. allocate to anyone who might know the power that be? Yeah right, that's the way to go. No wonder the Supreme Court didn't find that argument amusing?. You have no case, not even in the Supreme court. End of story.

I have seen many many lame things but this is the lamest. The companies will not recover the money for auctions from customers. Obviously they're in this for charity

Done by a process of reverse auction. This rule is brought in to see that there is no siphoning of the coal & tariffs aren't raised using other heads.

 

[wolfschanzze]

I have seen many many lame things but this is the lamest. The companies will not recover the money for auctions from customers. Obviously they're in this for charity

Do read,
Coal block auction: Government likely to cap costs of power plants - The Economic Times
The companies cannot overcharge.
The government plans to cap costs of power plants that can be passed on to electricity consumers, to prevent rise in tariffs as all power firms have agreed to forego mining costs for winning the blocks.

Even after all these clauses they are coming forward to bid at such high prices,tells you a different picture.
Nobody does it for charity,Companies come forward to bid only if they see profit not losses.

 

[OTTOMAN]

Coal industry expert Sunjoy Joshi tells Sheela Bhatt/Rediff.com that the NDA's e-auction of coal blocks will not solve the fundamental problems that dog the industry.

I wonder what kind of expert is this?

First thing built in any coal mine is a power plant.... while mining of coal is relatively simple as compare to other minerals.

Well if you import coal or locally produce is your choice.... perhaps the guy who bought coal mine in Australia, was not thinking that oil prices may be reduced and now is paying off these fake experts to issue BS on tech. bussiness.
My guess, since the coal market is at rock bottom and there are many suppliers in region, i see no buyers of expensive Australian coal, who itself import from Indonesia, simply because its cheaper to buy than to produce!

I decided to pass expert opinion, as no TT can contribute anything useful here.
You may take my advice to any expert of either field, mining, power generation or economics, they all will endorse, what i wrote.

 

[dray]

That is not the government's problem but of the person who bid. Secondly, this is not a valid argument against the present auction system because the same people had got the mines before too, only in an nontransparent manner & without forking up the money.

Now these bidders are ready to pay such huge sums of money for the same coal blocks that they were getting for free, and even then they will remain competitive and profitable, just imagine the kind of money they were making earlier.

 

[Guynextdoor2]

Ya, obviously I'm not the only one who doesn't understand your idea, I'm in good company of the Supreme Court & CAG. I prefer that we now have the money in government coffers rather than in the financial statements of the telecom companies. How you defend a non-transparent allocation of a national resources is best understood by you. First come, first serve. allocate to anyone who might know the power that be? Yeah right, that's the way to go. No wonder the Supreme Court didn't find that argument amusing?. You have no case, not even in the Supreme court. End of story.




Done by a process of reverse auction. This rule is brought in to see that there is no siphoning of the coal & tariffs aren't raised using other heads.

Neither the Supreme Court nor the CAG have criticized the fee process for basic telephony. Their issue was with 2G which was clearly a value added services and deserved the auction approach. Rest of your commentary is general nonsense. The governements priority is to ensure maximum well being, and for it to happen if direct revenues have to be given up, they should be. Whether the blocks should be auctioned or not is not the question- whether it achieves the overall objectives is the question. India has large sections still without electricity. Plus, not allowing large efficient operators whose core competence is in a given field very very big decision. When someone can do an operation 40% cheaper, whether they should not get direct preference is a very importat question. They can dazzle you with numbers like 700 lakh crore, but over the years the overall costs if taking an inefficient decision will be much much more than that.

All around the world concepts like forward and backward integarion have lost validity in almost all industries. Is BP in the business of power generaion? Do you see Airbus or Boeing do anything other than make planes? Does ford own any integrated steel units in it's plants? It shut them down and has kept it shut till date. This whole idea of having captive blocks itself is an outdated one.

Now these bidders are ready to pay such huge sums of money for the same coal blocks that they were getting for free, and even then they will remain competitive and profitable, just imagine the kind of money they were making earlier.

Consumer prices were low. So no your argument is invalid. In fact only in one state there has been a controversy around electricity, and surprise surprise, in that state a private operator who insists on marking natural gas to 'market prices' in wells he does not own is the primary supplier.

 

[Span]

What do you prefer, government earning thousands of crores OR prices of services like telecommunications or commodities like steel being low?

And please, if you're of the view that the companies don't pass the auction costs on to the consumers, don't waste your time on this thread.

This article makes perfect sense.

@Guynextdoor2: Are you associated with any of the Indian business organizations? The general public obviously falls for the lakhs of crores being earned by the government by following 'the proper procedure' but if you ask anyone in FICCI or Assocham, they know this is not conducive to either a sound business environment or pro-consumers.

PS. I'm not saying the Congressi chors didn't look after their own interest, but the overall policy didn't cost the nation anything and was rather in the public interest.

 

[dray]

You have no understading of the telecom auctions. The basic telephony licenses were given fee basis, therefore basic telephony rates are low. 'Value Added' services beyond basic telephony went on auctions because they were not 'basic services' and not 'essential'. The rationalized structure- basic call rates are therefore low- 1 paise per minute. Tell me which other service is low? 3G was auctioned at $15 B and rarely come for less than 1000 per customer per month. Which poor person can afford a 3G or 2 G service? And how electricity mysteriously different? Coal prices have the same impact on an economy that oil prices have. Oil affects transport, coal effects household electricity.

WRONG. The telecom bandwidth allocation that Supreme court cancelled and kept a bunch of corrupt politicians in jail for months were for voice calling only, bandwidth for basic mobile telephony.

 

[Guynextdoor2]

What do you prefer, government earning thousands of crores OR prices of services like telecommunications or commodities like steel being low?

And please, if you're of the view that the companies don't pass the auction costs on to the consumers, don't waste your time on this thread.

This article makes perfect sense.

@Guynextdoor2: Are you associated with any of the Indian business organizations? The general public obviously falls for the lakhs of crores being earned by the government by following 'the proper procedure' but if you ask anyone in FICCI or Assocham, they know this is not conducive to either a sound business environment or pro-consumers.

I work for a 'business organization' and unlike what most people think we don't take a blanket view of 'profit is everything'. Most companies want to operate for decades. So if a country grows strong, has an educated populace it is better for us in the long term. India is a poor country on the cusp of growth. For certain facilities- food, basic clothing, basic shelter and water, the government's aim should be to maximize public good. If high end housing or healthcare or cars are taxed, no one opposes it. If 3G or 4G gets auctioned at 15 or 20 Billion, no one will have a problem with it. But the coal auction will have a large impact downstream on all kinds of industries.

WRONG. The telecom bandwidth allocation that Supreme court cancelled and kept a bunch of corrupt politicians in jail for months were for voice calling only, bandwidth for basic mobile telephony.

Stop talking nonsense. Basic (if you know how to read) telephony- ie voice, has had no opposition from any quarters in being given out on fixed licenses. Anything above that gets auctioned. That's the principle. And if anyone has tried to prove that non basic telephony is actually basic, then obviously he deserves to be in jail.

 

[Span]

even then they will remain competitive and profitable, .

You have no idea what you're talking about. Give the domestic steel industry a couple of years and it will eventually die unless there's a shift in the present government's policy. (I can only talk about steel because I only have information regarding steel industry)

Modi's Make in India is relying heavily on imported steel, killing the domestic players. It is not even profitable for most to manufacture steel, not because they're inefficient but because of the policies of the government.

I cannot say about others but the one company I know is a big player in steel, no longer makes a profit and rather compensates for the loss by earning profit in the other sector it is involved in. And this is the case despite introduction of new technology and super efficient methods to manufacture steel.

 

[dray]

Neither the Supreme Court nor the CAG have criticized the fee process for basic telephony. Their issue was with 2G which was clearly a value added services and deserved the auction approach.

2G is basic mobile telephony that we are using for more than a decade. Mobile telephony was always voice + data in the form of sms and slow internet connection. 2G is the basic license a company takes to offer basic mobile telephone service in India.

 

[Bang Galore]

Neither the Supreme Court nor the CAG have criticized the fee process for basic telephony. Their issue was with 2G which was clearly a value added services and deserved the auction approach. Rest of your commentary is general nonsense. The governements priority is to ensure maximum well being, and for it to happen if direct revenues have to be given up, they should be. Whether the blocks should be auctioned or not is not the question- whether it achieves the overall objectives is the question. India has large sections still without electricity. Plus, not allowing large efficient operators whose core competence is in a given field very very big decision. When someone can do an operation 40% cheaper, whether they should not get direct preference is a very importat question. They can dazzle you with numbers like 700 lakh crore, but over the years the overall costs if taking an inefficient decision will be much much more than that.

All around the world concepts like forward and backward integarion have lost validity in almost all industries. Is BP in the business of power generaion? Do you see Airbus or Boeing do anything other than make planes? Does ford own any integrated steel units in it's plants? It shut them down and has kept it shut till date. This whole idea of having captive blocks itself is an outdated one..

You are the one spouting discredited arguments and you talk about another's arguments being nonsense. You don't even understand what the man was talking about. Nor do you understand what you say when you talk about forward & backward integration having lost validity. That is not the problem of the government of India. That is of concern to the industrialist bidding. Why should the government of India care what business philosophy an industrialist follows ?

The previous allocation was done in a non-transparent manner without receiving money & given with no conditions. What guarantee did you have that they would pass on the benefits? Goodness of their heart? Why should the government subsidise steel companies in an arbitrary manner where some got benefits & others didn't? The same chaps who may have believed or not believed in forward, backward, upper or downward integration got the mining rights earlier too. The only losers were the people of India & especially the state governments where the mines were located. That has now been corrected in the most transparent of manner. What is the argument here? The same companies thought it fit to bid, the state government saw revenue accruing & you find the problem where exactly?

As I said the Supreme Court held that the licenses were invalid, it wasn't the Modi government's decision. What they get credit for is to formulate a transparent mechanism to allot the mines keeping the Supreme Court order in mind. You have no case. At all. You keep arguing for what the supreme court has already ruled against. If you disagree, your argument is against the supreme Court. The Modi government comes nowhere in your argument.

 

[Guynextdoor2]

Do read,
Coal block auction: Government likely to cap costs of power plants - The Economic Times
The companies cannot overcharge.
The government plans to cap costs of power plants that can be passed on to electricity consumers, to prevent rise in tariffs as all power firms have agreed to forego mining costs for winning the blocks.

Even after all these clauses they are coming forward to bid at such high prices,tells you a different picture.
Nobody does it for charity,Companies come forward to bid only if they see profit not losses.

You know this is the part that's called Jalebi. . THEY WILL FOREGO MINING COSTS . Mark my words, EVERY SINGLE PENNY WITH A GOOD RETURN ON INVESTMENT WILL BE TAKEN IN. I MEAN EVERY SINGLE PENNY.

WHere do you think this financing is coming from? COmpanies are gonna give their money? You think they're sitting out there with 7 Lakh CRores sitting in their accounts?of course not, to finance this they'll take money from the banks and they'll take interest I'm sure it'll be 8% and above. So they'll recover the 7 lakh crore+ the interest to be paid+ a ROI for themselves. That's several lakh crore more than they invested over time. Get ready for inflation, tab tak ye khao