Ahead of the dawn of competitive bidding, the government plans to allocate a fifth of the country’s coal reserves to Coal India (CIL), a company it owns. Beyond the existing allocations, 146 coal blocks with reserves over 60 billion tonnes is proposed to be handed to the PSU, which will help it retain its No.1 position in India’s coal mining industry.
Several blocks have been identified for allocation to other entities too once auction process begins early next year. In the upcoming competitive bidding regime, miners and users will place bids to get blocks.
As per the Geological Survey of India, the country’s total coal resources are estimated at 267 billion tonnes. Proven reserves, where estimates of production can be made more accurately, stand close to 60 billion tonnes.
As per suggestions made by CIL and finalised by the coal ministry, 116 blocks with reserves of about 55 billion tonnes will be offered to CIL subsidiaries.
Another 30 blocks are proposed to be left out, which may be allocated for non-CIL mining. These blocks could also be considered for mining by CIL depending on the response from other users in the auction process, said a source in the coal ministry.
?Assurance of coal blocks will aid CIL?s plan to achieve a production level of 556 million tonnes per annum by the end of the Twelfth Five-Year Plan (March, 2017),? said a CIL official. CIL is expected to end this fiscal with a production of 452 million tonne.
The government has decided that blocks put on auction would be earmarked sectorally, meaning a clutch of blocks will be reserved for a specific sector, say power. However, central and state utilities (including power utilities and mining corporations) will continue to get allocations of coal blocks, without participating in the bidding route.
?In a competitive environment, the government should open up the entire resource for bidding than continue with reservations. This will reduce the chances of private companies getting access to domestic coal sources and resort to expensive imports,? said an official of a leading private sector power company.
The government wants to protect the interests of CIL as the company will continue to play an important role in the Indian market. CIL?s coal production has stagnated at 432 million tone level for the past couple of years due to various environmental and land acquisition related issues. It is feared that if additional blocks are not provided, the world?s largest coal producer could soon lose its coveted status. CIL?s large presence is also required as private sector has so far not performed as per expectations. Out of 198 captive coal blocks allocated to companies in power, steel and cement sectors, only about 25 are functional, producing less than 40 million tonne annually. The ministry has also annulled a few coal block allocations due to delays on the part of companies in bringing them under production.
As per a Planning Commission estimate, India will import over 200 million tonnes of expensive coal by 2017 due to shortages in the domestic market. Imports are already slated to touch 142 million tonnes in 2011-12. Enhancing coal production thus becomes important.