Coal Ministry’s new policy to reduce financial burden on bidders during mine operationalization

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In a move that could benefit bidders financially, the coal ministry on Saturday decided that the first revision in Performance Bank Guarantee (PBG) would be done upon the grant of mine opening permission for the respective coal mines. The ministry has extended the auction bid due date to January 30, 2023, from its earlier bid due date of January 13, 2023.

According to the ministry, “This investor-friendly initiative is likely to reduce the financial burden on bidders during the process of operationalization of coal mines and will enhance participation from bidders in commercial mines’ auctions.” The bank guarantee mandates a company (who gets the tender) to provide some proportion of tender value to ensure performance and minimize risk if it denies completing the project.

As per the provisions of the tender document, PBG is to be submitted for each successfully auctioned mine, to be revised annually based on the National Coal Index (NCI) for April at the beginning of the year. As NCI has doubled since the launch of the first commercial mine auctions in 2020, several representations were received from the industry for relaxation in PBG revision provisions.

The industry has welcomed this new policy as it would reduce the financial burden on bidders during the process of operationalization of coal mines and enhance participation from bidders in commercial mines’ auctions. This is seen as a positive step taken by the Coal Ministry to support the industry and attract more bidders. The extended bid due date will also give more time for bidders to prepare their proposals.