To attract private players, the Cabinet in February 2018 had approved the auction methodology for commercial mining.
To ramp up domestic coal production and cut import bills, the government is planning to relax a host of environmental and land usage norms to help mine owners receive clearances faster and more easily.
A committee of secretaries met earlier this month under the chairmanship of Cabinet secretary Rajiv Gauba to discuss coal supply to the power sector, where the Union environment and coal ministries were suggested to come up with new measures to facilitate early operationalisation of allotted coal blocks.
According to the minutes of the meeting reviewed by FE, the Union coal ministry is considering a proposal to allow restored/reclaimed land of Coal India for compensatory afforestation, which is mandatory under the Forest (Conservation) Act, 1980. State governments take up a lot of time to earmark land for this purpose, delaying the overall process. Land tracts which are identified as forest in state revenue records but not in the Forest Act may also be used for compensatory reafforestation, secretary, environment and forest ministry said.
The coal secretary said that an Ordinance is being proposed for doing away with the requirement of “previous approval” by the central government for receiving mining lease under the Mines and Minerals Development and Regulation Act (MMDR) Act. Also, for coal blocks allocated by the central government, the coal ministry is also exploring the possibility of doing away the requirement of separate mining lease from state governments. The committee recommended that the environment ministry, in consultation with the tribal affairs ministry, should also examine the possibility of de-linking forest rights Act for granting clearances to coal mines.
As many as 84 mines have been allocated (24 auctioned, 60 allotted to PSUs), of which only 29 are currently operational. Reallocated blocks are yet to commence production mainly because of delays in receiving forest clearances, mining-safety permissions, land acquisition and ongoing litigation. Blocks also remain non-productive due to inadequate transportation infrastructure and conflicts with mining contractors. Financial distress of a few developers who won the blocks in auction is also a reason for the delay.
Captive coal mines produced 25.1 million tonnes (MT) of the fuel in FY19, 55% higher than FY18. However, it is still much lower than the peak output of 43.2 MT from 42 operational blocks in FY15, when the Supreme Court cancelled 204 licences saying these were allocated in an illegal and arbitrary manner. Experts have attributed sub-optimal use of captive coal mines to lower requirement at power plants to which they are tied up to, and have argued that such dynamics limit competition and reduce efficiency. Coal production from captive mines in the first five months of the ongoing fiscal have increased by about 65% y-o-y to 22.4 MT from the year-ago period.
To attract private players, the Cabinet in February 2018 had approved the auction methodology for commercial mining. Even after that, several auctions had to be cancelled as they could not even elicit three bidders to participate. This is in sharp contrast to the aggressive bidding for the 31 blocks that went under the hammer in 2015. In February 2019, the Cabinet allowed private companies to sell up to 25% of production from captive coal mines in the open market, following which, the coal ministry is preparing for the auction of 27 coal mines. It would also allot 15 coal mines to government companies.