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Govt Further Opens up Coal Mining; Allows Non-Coal Firms to Bid

Modi government to bring in ordinance to end monopoly of Coal India, remove curbs on end use of fuel.
FDI in Coal

New Delhi: In a bid to attract investments and boost domestic coal production, the government on Wednesday approved promulgation of an ordinance to open up coal mining in the country to non-coal companies while removing restrictions on end-use of the fuel.

The Union Cabinet headed by Prime Minister Narendra Modi also gave its nod for concluding auction of iron ore and other mineral mines before the expiry of their current mining lease on March 31, so as to avoid disruption in production.

Briefing reporters, Coal and Mines Minister Prahlad Joshi said the Cabinet has approved promulgation of Mineral Laws (Amendment) Ordinance 2020 to amend Mines and Minerals (Development and Regulation ) Act 1957 and Coal Mines (Special Provisions) Act 2015.

The ordinance will amend the current proviso in the law that allows only companies in coal mining to bid for coal mines.

Any company meeting the minimum criteria will now be allowed to bid for coal mines, the first auction of which under the liberalised rules will open within this month, Coal Secretary Anil Kumar Jain said.

As many as 40 coal blocks will be put up for auction in the new round, he said.

The move will end the monopoly of state-owned Coal India Ltd.

India's coal sector was nationalised in 1973.

Joshi, however, said Coal India will be "supported and strengthened" and adequate blocks will be allocated to it to meet the target of producing 1 billion tonnes of coal by 2023.

Of the 204 coal blocks whose allocation was cancelled by the Supreme Court in 2014, only 29 could be auctioned as some of these mines had end-use restrictions - meaning coal produced from them could be used only for the designated captive purpose only and not traded in the market.

The opening up of the mining to non-coal companies as well as removing the end-use restriction will pave way for the auction of these mines, he said.

Joshi said India has the world's fourth-largest coal reserves, yet it imported 235 million tonnes of coal for Rs 1.71 lakh crore last fiscal. Of these imports, about 100 million tonnes is non-substitutable as they are tied to the power plant or user factories, the rest can be cut down, he said.

He also said lease of 334 non-captive mineral mines is expiring on March 31, 2020. Of these, 46 mines, mostly in Odisha and Karnataka, are operational. Of the 46, 36 are iron ore mines.

The country would face a shortfall of 60 million tonnes of iron ore if these mines are shut due to expiry of mining lease and the time taken in re-auctioning them, he said, adding the Cabinet has approved auctioning them before March 31 as also transferring the current forest and environment clearances to the new winner thereby saving 2 years needed in normal course to get those approvals.

This, Joshi said, would enable seamless transfer and no production will be lost.

Under the ordinance, allocation of coal/lignite blocks for composite prospecting license cum mining lease has been provided; requirement of previous approval in cases where the allocation of blocks was made by the central government has been dispensed with, the minister said.

"This will speed up the process of implementation of projects, ease of doing business, simplification of procedure and benefit all the parties in areas where minerals are located," he said.

In 2018, the government had allowed commercial mining by private entities but non-coal companies couldn't participate in the auction. In August last year, the government announced 100 per cent foreign direct investment (FDI) under the automatic route in coal mining for open sale, besides creating associated infrastructure, such as washeries.

The move to amend the law will help India gain access to high-end technology for underground mining used by global miners.

Oil and Steel Minister Dharmendra Pradhan termed the decision as "a mother reform in the coal industry".

Commenting on the decision, Sajjan Jindal, Chairman and Managing Director JSW Group, said:  "Continuity of all Forest and Environment clearances for iron-ore mines for a period of 2 years is another great reform." 

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