4
Private sector participation had been inherently low
since coal mines were nationalized in 1973, only the mines
of Tata Steel and Indian Iron Steel Company were allowed
to continue operation with no government-ownership
through a provision in the nationalization act of 1973
(Yadav, Singh &Gautam, 2019). This was for captive min-
ing -coal mining by the users of coal in steel making indus-
try (Pachauri, 1999). Approved usages for captive mining
were subsequently expanded to include cement manufac-
turing, power generation, coal liquefaction and coal gasifi-
cation. Coal blocks were allocated to these captive users in
several tranches from 1993 onwards though a mechanism
called the Screening Committee Route, akin to beauty-
parade (Dipu, 2022). The much sought after coal resources
were allocated through a screening committee mechanism
that evaluated applications on parameters like -status
(stage) level of progress and state of preparedness of the user
projects net worth of the applicant company (or in the case
of a new SP/JV, the net worth of their principals) produc-
tion capacity as proposed in the application maximum
recoverable reserve as proposed in the application date of
commissioning of captive mine as proposed in the applica-
tion date of completion of detailed exploration (in respect
of unexplored blocks only) as proposed in the application
technical experience (in terms of existing capacities in coal/
lignite mining and specified end use) recommendation of
the administrative ministry concerned recommendation of
the State Government concerned (i.e., where the captive
block is located) and track record and financial strength of
the company. This method, even though not entirely objec-
tive, worked for a time when the demand for coal blocks
was low (Chandra, 2018).
When the number of application reached 750 for 16
blocks for power generation in 2006 round, the method
was stretched beyond its normal application (Dipu, 2022).
Hence, the questions are raised and lack of objectivity and
transparency has led to allegations of corruption (Sen,
2013). Coal block allocations were then investigated by the
federal auditors, Comptroller and Auditor General (CAG)
and by Central Bureau of Investigation (CBI) while a case
on public interest was heard in the Supreme Court of India
(Dipu, 2022). In 2014, the Supreme Court ruled that these
allocations did not have legal validity under any of the pro-
visions of the Coal Mines Nationalization Act, 1973. Thus,
allocation of a set of 214 coal blocks were nullified and 4
were considered valid since those were allocated through a
competitive bidding process as part of package involving
pithead power plants.
While this case was being heard in the Supreme
Court and investigations were being done by agencies,
the government of India formulated competitive bidding
rules for future allocation of coal blocks in 2011 (Jain,
2022). The Rules were promulgated in 2012 as Auction by
Competitive Bidding of Coal Mines Rules, 2012. This was
the first-price English auction mechanism relying on com-
mon value auction theory. However, no coal blocks were
auctioned until 2014. The legal framework for allocation
of cancelled coal blocks was provided through the Coal
Mines (Special Provisions) Act, 2015 (preceded by the two
Ordinances in October 2014 and December 2014), Coal
Mines (Special Provisions) Rules, which were followed by
issue of Standard Tender Document (STD) (CAG, 2016).
Thus began the regime of coal block auctions which we
study in this paper.
In these coal block auctions, Government of India
provides information dossiers that contains information of
coal blocks on offer. These include technical reports con-
taining geological, topographical and technological reports.
These reports thus provide information largely available to
all participating bidders equally, which is indicative of their
public value (Dipu, 2022). Private information on these
coal blocks, on the other hand, are specific to each of the
individual participating bidders – which is the reason why
they offer different bids for the coal blocks (Sarkar 2021).
Private values are determined by these private information
for the participating bidders, which is not available for
analysis and research. Hence, this study focuses on inter-
play of public information and competitive intensity on the
outcomes of bidding.
In this study, while the interplay of public value and
competitive intensity is examined, the focus of study is on
the moderating and mediating effect of competitive inten-
sity on the relationship of public value of coal blocks on bid-
ding outcomes. These effects are defined in greater details
on the section on theory building, models and hypothesis,
however, for clarity on the scope of this study, moderating
effect is defined as the influence of competitive intensity as
an independent variable on the relationship between pub-
lic value of coal blocks, another independent variable, on
bidding outcomes, a dependent variable, while mediating
effect is defined as degree of influence that public values
have on bidding outcomes directly and indirectly through
variation in competitive intensity. These model along with
their mathematical equations and diagrammatic presenta-
tions follow in the section on theory building, models and
hypotheses in this paper.
RESEARCH QUESTIONS
Coal block auctions in India have been well-received by
private sector reflected in the degree of participation and
Private sector participation had been inherently low
since coal mines were nationalized in 1973, only the mines
of Tata Steel and Indian Iron Steel Company were allowed
to continue operation with no government-ownership
through a provision in the nationalization act of 1973
(Yadav, Singh &Gautam, 2019). This was for captive min-
ing -coal mining by the users of coal in steel making indus-
try (Pachauri, 1999). Approved usages for captive mining
were subsequently expanded to include cement manufac-
turing, power generation, coal liquefaction and coal gasifi-
cation. Coal blocks were allocated to these captive users in
several tranches from 1993 onwards though a mechanism
called the Screening Committee Route, akin to beauty-
parade (Dipu, 2022). The much sought after coal resources
were allocated through a screening committee mechanism
that evaluated applications on parameters like -status
(stage) level of progress and state of preparedness of the user
projects net worth of the applicant company (or in the case
of a new SP/JV, the net worth of their principals) produc-
tion capacity as proposed in the application maximum
recoverable reserve as proposed in the application date of
commissioning of captive mine as proposed in the applica-
tion date of completion of detailed exploration (in respect
of unexplored blocks only) as proposed in the application
technical experience (in terms of existing capacities in coal/
lignite mining and specified end use) recommendation of
the administrative ministry concerned recommendation of
the State Government concerned (i.e., where the captive
block is located) and track record and financial strength of
the company. This method, even though not entirely objec-
tive, worked for a time when the demand for coal blocks
was low (Chandra, 2018).
When the number of application reached 750 for 16
blocks for power generation in 2006 round, the method
was stretched beyond its normal application (Dipu, 2022).
Hence, the questions are raised and lack of objectivity and
transparency has led to allegations of corruption (Sen,
2013). Coal block allocations were then investigated by the
federal auditors, Comptroller and Auditor General (CAG)
and by Central Bureau of Investigation (CBI) while a case
on public interest was heard in the Supreme Court of India
(Dipu, 2022). In 2014, the Supreme Court ruled that these
allocations did not have legal validity under any of the pro-
visions of the Coal Mines Nationalization Act, 1973. Thus,
allocation of a set of 214 coal blocks were nullified and 4
were considered valid since those were allocated through a
competitive bidding process as part of package involving
pithead power plants.
While this case was being heard in the Supreme
Court and investigations were being done by agencies,
the government of India formulated competitive bidding
rules for future allocation of coal blocks in 2011 (Jain,
2022). The Rules were promulgated in 2012 as Auction by
Competitive Bidding of Coal Mines Rules, 2012. This was
the first-price English auction mechanism relying on com-
mon value auction theory. However, no coal blocks were
auctioned until 2014. The legal framework for allocation
of cancelled coal blocks was provided through the Coal
Mines (Special Provisions) Act, 2015 (preceded by the two
Ordinances in October 2014 and December 2014), Coal
Mines (Special Provisions) Rules, which were followed by
issue of Standard Tender Document (STD) (CAG, 2016).
Thus began the regime of coal block auctions which we
study in this paper.
In these coal block auctions, Government of India
provides information dossiers that contains information of
coal blocks on offer. These include technical reports con-
taining geological, topographical and technological reports.
These reports thus provide information largely available to
all participating bidders equally, which is indicative of their
public value (Dipu, 2022). Private information on these
coal blocks, on the other hand, are specific to each of the
individual participating bidders – which is the reason why
they offer different bids for the coal blocks (Sarkar 2021).
Private values are determined by these private information
for the participating bidders, which is not available for
analysis and research. Hence, this study focuses on inter-
play of public information and competitive intensity on the
outcomes of bidding.
In this study, while the interplay of public value and
competitive intensity is examined, the focus of study is on
the moderating and mediating effect of competitive inten-
sity on the relationship of public value of coal blocks on bid-
ding outcomes. These effects are defined in greater details
on the section on theory building, models and hypothesis,
however, for clarity on the scope of this study, moderating
effect is defined as the influence of competitive intensity as
an independent variable on the relationship between pub-
lic value of coal blocks, another independent variable, on
bidding outcomes, a dependent variable, while mediating
effect is defined as degree of influence that public values
have on bidding outcomes directly and indirectly through
variation in competitive intensity. These model along with
their mathematical equations and diagrammatic presenta-
tions follow in the section on theory building, models and
hypotheses in this paper.
RESEARCH QUESTIONS
Coal block auctions in India have been well-received by
private sector reflected in the degree of participation and