India rejects low winning bids for 4 "outlier" coal mines

(Updates with company statement)

NEW DELHI, March 21 (Reuters) - India has rejected winning bids for four of 33 coal mines put up for auction in the past two months, the top civil servant in the country's coal ministry said on Saturday, in a decision that will most hurt Jindal Steel and Power Ltd.

The ministry had examined nine blocks whose surprise low bids prompted the designation "outliers". But bids for five of those mines were accepted, Coal Secretary Anil Swarup said in a Twitter (Xetra: A1W6XZ - news) post early on Saturday.

Although the winning bids for the nine mines were the highest in their individual auctions, they were low by comparison with the winning bids for other similar blocks.

Jindal Steel, controlled by former lawmaker Naveen Jindal and one of the biggest beneficiaries of the previous method of mine allocation that a court ruled illegal, has now become the biggest loser with three of its bids rejected.

"We are puzzled with the decision and would make our best efforts to engage in a dialogue with the coal ministry and government authorities to present the facts," a spokesman for Jindal Steel said in an emailed statement.

Former Prime Minister Manmohan Singh, from the same Congress party as Jindal, has been asked to appear before a court in connection with an alleged coal scam.

Aluminium maker BALCO, majority owned by mining major Vedanta Ltd, is the other company whose bid was cancelled, according to a list in Swarup's message.

Officials of BALCO could not immediately be reached for comment.

Jindal Steel had offered to pay 108 rupees ($2) per tonne in the auction for Gare Palma 4/2 and 4/3, two adjoining blocks it had held previously.

That was the lowest winning bid among the first few blocks meant for the power sector. Bids are typically based on estimated tonnage in the mines and quality of coal available.

Bids on other blocks in the power sector had ranged as high as 1,100 rupees per tonne.

But Jindal Steel and industry consultants have said it was wrong to cancel winning bids after a base price of 100 rupees per tonne was set.

Others have said reassessing the auctions after the posting of the highest bids sends the wrong signal to the market ahead of more auctions.

The government is looking to sell off more than 200 coal mines and parliament passed a bill on Friday to keep the process going. The measure replaces an executive decree reissued in December after it was issued in October. (Reporting by Krishna N. Das; Additional reporting by Aman Shah; Editing by Clarence Fernandez and Mark Pottre)