Private captive coal mining companies have expressed dismay over the coal ministry?s new policy directive mandating sale of surplus coal to Coal India (CIL) at a price not higher than the cost of production.
They argue that this would not serve the national goal of increasing coal production to keep dependence on imports from rising sharply.
The coal ministry recently issued a policy note saying that any surplus coal produced from captive mines will be transferred to the nearest CIL subsidiary
and the payable price will be the cost of production or the CIL-notified rate, whichever is lower.
?The need of the time is to have an enabling policy framework for accelerating and augmenting coal production. However, the coal ministry?s policy directive on disposal of surplus coal does just the opposite,? said Ashok Khurana in a letter sent to coal minister Sriprakash Jaiswal recently on behalf of private
power project developers. Khurana is director general of Association of Power Producers (APP), a representative body of private power producers like Tata Power, Reliance Power, Lanco and Adani Power.
?The policy does not provide incentive for large players to enter mining, utilise world-class technologies and increase their mining capacities since the cost of production or CIL-notified price would be highly inadequate to encourage investments in the sector,? Khurana argued.
He has also that the coal ministry?s policy could also defeat the very purpose of the draft MMDR Bill 2010, which aims to ensure the support of the local community in acquisition of land for mining projects. The Bill has proposed making it mandatory for coal mining companies to pay 26% of their profit after tax (PAT) for the development of the local community.
?If entire surplus coal from captive mines is sold as per the ministry?s pricing methodology, the contribution from mining companies toward the local development fund would be very low, which could in turn negate the objective of the proposed legislation,? the APP director general said..
?Besides, the implementation of the ministry?s pricing formula would also hurt revenues of states from the sector as royalty on coal is payable on ad valorem basis,? the letter said.