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COMMERCIAL MINING OF COAL
Posted On: 15 DEC 2021 14:00 PM
Big Boost to Aatmanirbhar Bharat
(Ministry of Coal)
December 15, 2021
“Not only are we launching the auction of commercial coal mining today, but also freeing the coal sector from decades of lockdown.”
- Prime Minister Narendra Modi
1. Introduction
In 2014, the challenges the in coal sector were daunting. The Supreme Court had cancelled the Coal blocks allotted by the earlier regime for captive use. Under Prime Minister Narendra Modi, the government’s response was a series of calibrated and sequential steps to reform the entire sector.
2. Need for Reforms
- India has the fourth largest coal reserves in the world. Inspite of this, India is the second largest importer of coal. India spent Rs 1.5 lakh crore of foreign exchange on coal imports in the year 2019-20.
- Coal needs for the development of the country are increasing rapidly. As per the Draft National Energy Policy of Niti Aayog, the demand for coal is expected to rise in the range of 1.3-1.5 billion tonnes by 2030. Coal India Limited and other government companies cannot meet this demand with their production alone.
- China is the largest producer and consumer of coal in the world and is giving new momentum to development by extensive exploitation of its coal reserves. It is important that by making extensive use of our coal deposits at the earliest, we give a new momentum and edge to the country’s development.
3. Success of the Auctions of Commercial Coal Mines
- A total of 76 bids were received for 23 mines, wherein 19 mines had received two or more bids and qualified for the auctioning process. The cumulative peak-rated capacity of these 19 mines was almost 51 MTPA.
- The average success rate of last 10 tranches of auction was 30 per cent whereas the average success rate of India’s first commercial coal mining auctions (tranche 11) is 50 per cent, which shows the industry has given overwhelming response to the auction.
- Mines on auction across five states in the country witnessed strong competition in the commercial bidding and received robust offers over the floor price. Premium of more than 66 per cent was received for a mine in Chhattisgarh.
- Opening up the coal sector had garnered interest from other sectors as well. Participants in the bidding process also included players from several other sectors like Real Estate, Infrastructure, Pharmaceuticals etc.
- The auction process for 67 coal mines was launched on March 25, 2021 and is currently under progress. This is the largest tranche of mines ever being put up for auction by the Government of India.Total resources of about 36 billion tonnes of coal are on offer in this tranche.
4. Paving the Way forCommercial Mining of Coal
- Mineral Laws (Amendment) Act, 2020, Mines & Mineral (Development and Regulation) Act, 1957 and the Coal Mines (Special Provisions) Act, 2015 were amended. Mineral Laws (Amendment) Act, 2020 formed the basic framework to liberalise the coal sector in India.
- UnionGovernment has worked assiduously over the last six years to remedy the situation in Coal Mining. To make it equitable for investors, Government has taken several steps to boost Ease of Doing Business in the coal sector. The process of approval for Mining Plan has been simplified from 90 days to 30 days.
- Under MMDR Act and CMSP Act, the authority to allocate coal mines is vested with the Union Government. The Government adopted a two-stage electronic auction process for allocation of coal mines. Bids once received, were examined and determined eligibility under technical scrutiny. Once these bids qualified, the entire auction was conducted transparently on an online auction platform.
- Ministry of Coal has set up a Project Management Unit to assist in expediting clearances. Project Monitoring Unit will help successful bidders in getting clearances, consents etc. with all possible hand-holding and assistance from Governmental agencies of Centre and State for faster operationalisation of the coal mines.
- It was envisioned that the auction process of coal mines for commercial mining would give a thrust to adoption of newer and cleaner technologies like coal gasification and coal liquefaction. 20 per cent rebate was, therefore, extended for quantity under coal gasification or liquefaction.
- The government also introduced a system of sharing of revenues, moving away from fixed rates to an ad-valorem system. So, when the prices go up, the miner shares more with the government and if they soften, the sharing decreases.
5. Liberalisingthe Coal Sector: Steps Taken
- No end-use restriction for participation in coal mine auctions.
- Free trade of coal as producer can use, sell or export coal without restriction.
- Criteria of prior experience removed.
- Partially explored coal bocks were also put on auction.
- Adoption of revenue-sharing model instead of rupees per tonne
- Market-driven prices, as per National Coal Index
- Rebate to mine allottees in case of early production
- Rebate for quantity under Coal Gasification/Liquefaction.
6. Future Impact of Commercial Mining of Coal
- The coal mines auction process for commercial mining will lay a strong foundation for energy security in the country.
- Domestic industries and indigenous resources will get a boost from commercial mining activities. More than 69,000 jobs will be generated from the mines successfully auctioned in first tranche, with local people and regional economies being the biggest beneficiaries.
- Increased private sector participation will boost productivity and transparency.
- Private players’ participation also brings latest equipment, technology and services that will help to modernizing coal mining, saving time and cost.
Source: PIB e-booklet on Commercial Mining of Coal
AG/HP/AKP/SK
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