Stumped by political opposition to letting private companies into commercial coal mining, the government has found a way to achieve almost the same without having to face Parliament. It is planning to allot captive coal blocks to private miners like BHP Billiton, Rio Tinto and Sesa Goa on the condition that these firms have tied up with approved end users for supply.
Currently, captive blocks are allotted only to end-users like cement, steel and power companies. The move is expected to bridge the widening demand-supply mismatch for coal, leading to a surge in imports which are expensive.
Commercial coal mining was nationalised in the early 1970s and is not open to private firms. State-owned Coal India, which went public early this year, produces over 80% of the country's coal output (433 million tonnes in 2010-11). A few public sector entities like state power companies command over 10% and private end users the rest.
Under the captive mining policy, which has received a recent push, coal blocks are offered the private players in approved end-user segments like cement, power, steel, syngas and liquefaction. These firms, in turn, are free to form joint ventures in mining. Even under the auction route, only these sectors are eligible to participate.
“We have agreed to get fresh legal opinion on allowing independent mining firms to take part in auctions for captive blocks,” said a coal ministry official.
“Once we get clarity from the law ministry, modalities to let independent mining firms bid for captive coal blocks would be included in the guidelines on auction of coal blocks,” said the official. An earlier opinion from the attorney general had encouraged government to include mining firms in auction of captive coal blocks.
The proposal aims to end shortage of domestic coal with larger private sector participation. As per an assessment by the Planning Commission, India will need to import 200 million tonne of coal by 2017 as domestic production won't be unable to meet industry demand.
The proposal has already been endorsed by the committee on allocation of natural resources headed by former finance secretary Ashok Chawla and approved by the finance ministry and a committee headed by the secretary, department of economic affairs. There is wide approval that independent miners could be allowed in captive blocks without interfering with the provisions of the Coal Mines (Nationalisation), Act, 1973.
“Coal should be treated as an industry and companies given full access, not a