Ordinance sets the stage for opening up of mining sector

Written by ENS Economic Bureau | New Delhi | Updated: Oct 23 2014, 18:25pm hrs
Coal MineThe ordinance, signed by the President on Tuesday, provides for the Coal Mines (Nationalisation) Act, 1973, to be amended to allow any ?company or a joint venture company formed by two or more companies? to carry out coal mining operations.
The significant part of the Coal Mines (Special Provisions) Ordinance moved by the Centre on Monday is its incorporation of an enabling provision for the entry of private firms for commercial mining operations.

The ordinance, signed by the President on Tuesday, provides for the Coal Mines (Nationalisation) Act, 1973, to be amended to allow any company or a joint venture company formed by two or more companies to carry out coal mining operations. That includes not only for own consumption (i.e. for captive use), but also for sale or for any other purpose in accordance with the prospecting licence or mining lease, as the case may be.

The word sale clearly points to commercial mining. However, experts say that the Centre has retained its powers to decide the timing of when to open up the sector by way of prescribing it in the provisions of the prospecting licence or mining lease. This, officials said, is likely to happen after the Centre completes the auction of 74 blocks that are meant for the promoters of power, cement and steel plants.

A 27-page executive order posted on the coal ministrys website on Wednesday gives the government overriding powers in certain areas pertaining to two crucial laws Mines and Minerals (Development and Regulation) Act, 1957, and the CMN Act. While currently, apart from state-owned entities, the only private sector players that have been allotted coal blocks are domestic steel, power and cement companies, that too for captive use. The ordinance, technically, paves the way for foreign firms having their subsidiaries in India or through joint ventures to enter into commercial coal mining at a later stage, whenever the Centre decides to utilise the enabling provision to open up commercial mining. Certain overseas mining firms like UK-listed Rio Tinto already have an Indian subsidiary.

The ordinance was necessitated in view of the Supreme Courts order on September 24 cancelling allocation of 214 coal blocks to various companies since 1993 for the reason that they were done in an illegal manner by a casual approach and without application of mind.

As per the ordinance, any entity involved in coal exploration has to be registered in India and can bid for e-auction of coal blocks only if they are not convicted in any case and sentenced with imprisonment for more than three years for irregularities in the allocation of the mines.

Finance minister Arun Jaitley had on Monday said an enabling provision has been made for amending the CMN Act although this would be done in the future and Coal India Limited would not in any way be impacted. It would continue to function as it is and all the mining requirements of CIL in present and future will be adequately protected, he had said.

The government would appoint officer of the rank of joint secretary and above as the nominated authority, which would determine the reserve price and engage experts to make recommendations for conducting auction and execution of the vesting order for transfer and ownership of the auctioned coal mines.