The Government of India (GoI) has offered 10 blocks in different coalfields around the country for the exploration and production of Coal Bed Methane (CBM). The blocks, amounting to an area of 5,000 sq. kms, are located in the states of Assam, Jharkhand, Orrissa, Madhya Pradesh, Chhattisgarh, Maharashtra and Tamil Nadu. The GoI is inviting foreign and Indian companies to bid for the blocks on a level playing field through a competitive bidding system.

CBM in India

India, with the fourth largest proven coal reserves in the world, holds considerable prospects for exploration and exploitation of CBM. The total sedimentary area for CBM exploration is around 26,000 sq. kms. A total of 26 blocks covering an area of 13,600 sq. kms have been awarded under three previous bidding rounds, and three of these blocks have entered the development phase. Exploration has therefore yet to be initiated in nearly 50% of the total sedimentary area, presenting a significant opportunity for potential investors.

Key features of the bidding round

Companies may bid for one or more blocks, singly or in association with other companies through an unincorporated or incorporated venture. Successful bidders will be required to enter into a contract with the Government, which will be based on a Model Contract.

The GoI recently undertook a consultation process with various stakeholders, such as E&P companies and industry bodies, and their views have been factored into the preparation of the bid documents. Some features of the terms offered by the GoI are:

  • No signature bonus.
  • Up to 100% participation by foreign companies.
  • Royalty payable to the relevant State Government at the rate of 10%.
  • Biddable Production Level Payment payable to the Central Government.
  • Corporate income tax payable as per the Income Tax Act 1961.
  • Freedom to market gas in domestic market at market determined prices.
  • Fiscal stability provision in the contract.
  • No customs duty on imports required for CBM operations.
  • Provisions for assignment of participating interest.

Bid Evaluation

The following main criteria will be considered when evaluating bids submitted by a company/consortium:

(i) Technical capability

(ii) Financial strength

(iii) Work programme commitment

(iv) Fiscal package

Further information

Further details of the blocks on offer and the bidding process can be found by clicking here.

The closing date for bids is 10 August 2009.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

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The original publication date for this article was 20/05/2009.