After managing to secure the consensus of the mineral-rich states, the mines ministry is preparing to seek approval of the Union Cabinet for its proposal to allocate coal blocks through competitive bidding. If the ministry has its way then the proceeds generated from the auctioning process would be entirely given to the states, where the coal blocks are located.

In a draft note prepared for the consideration of the Cabinet, the ministry has argued in favour of adopting the new allocation process, which it believes would induce more transparency and objectivity while distributing coal blocks. A group of ministers chaired by former home minister Shivraj Patil had okayed the introduction competitive bidding-based allocation of coal blocks in July instead of the prevalent inter-ministerial screening committee approval system. The ministry argues that the impact on cost of production of coal on account of switching over to the proposed system would be marginal as the bidding would be driven by rational market behaviour.

With the demand for coal rising sharply, the number of applicants from public and private sectors too has gone up, making the current system of allocation difficult and vulnerable to criticism on the transparency and objectivity bases, a senior government official said. He pointed out that in some cases there were more than 100 applicants for the same set of coal blocks .