The coal ministry is now planning to allocate coal blocks to private sector mining companies having firm supply contacts with core sectors like cement, power and steel.
According to coal secretary H C Gupta, the ministry has secured enabling legal opinion in this regard and after further consultations, it would issue a notification allowing allocation of coal blocks to mining companies under the captive mining route.
Mr Gupta said that legal opinion on the matter suggested that the ministry could go ahead with the changes without seeking amendments to the Coal Mines (Nationalisation) Act, 1973. An amendment to the Act is considered difficult in the wake of strong opposition from labour unions and Left parties.
At present, coal blocks are allocated to cement, power and steel companies, strictly for their captive use.
As part of the reforms process in coal sector, government has also permitted 100% foreign direct investment (FDI) in captive coal blocks in power, steel and cement sectors.
The coal secretary said that changes in the norms for allocating captive coal blocks would require the ministry to first finalise the qualification and other criteria for mining companies to be given such coal blocks.
The government thrust on starting reforms in captive mining is aimed at increasing coal production through this route to meet growing demand.
Since 1993, 91 coal blocks have been allocated to captive users with total reserves of about 15 billion tonnes.Fresh allocation for 20 coal and 8 lignite blocks are to be undertaken shortly.
The government expects production from the captive route to go up to over 125 mt in five years if proper development is undertaken.
This would also help bridge the demand-supply gap that is expected to increase to 60 mt by 2011-12 as per Planning Commissions estimates.