The move is reportedly intended to increase transparency and bolster private investment in an industry which has experienced a recent slowdown in domestic production.
Coal Minister Sriprakash Jaiswal told the Wall Street Journal that New Delhi would scrap the current system which allows the government to hand out coal licenses without open auctioning.
“Auctions will definitely make the allocation process more transparent and expeditious,” he said on the newspaper’s website.
“Coal is a valuable resource now and a price tag should be put to it. Auctions will help us in discovering its real value in monetary terms.”
The overhaul in the coal block allocation system comes after a government audit leaked last month suggested state-owned miner Coal India lost $US206 billion by allocating coal blocks instead of auctioning them off.
The Confederation of Indian Industry subsequently called for the introduction of competitive bidding as a means of ensuring viable and sustainable development of the country’s power sector.
Forthcoming coal block auctions, however, may differ in procedure depending on the nature of the interested industry.
Citing an anonymous coal ministry source, The Indian Express, said cement and steel companies would be able to bid on licenses in open auctions – but power companies would participate through “competitive tariff-based bidding”
The Express said the government hoped to keep electricity prices low by using a tariff-based bidding method for power companies.