Pvt coal block operators may get methane rights

Ministry wants to give blocks producers hold for coal mining for CBM exploration on nomination basis

A year after the coal block allocation scam came into the spotlight, which landed the United Progressive Alliance government in trouble, the petroleum and natural gas ministry is gearing up to take another controversial decision.

In an upcoming Cabinet note giving mandate to state-run Coal India Ltd (CIL) to explore coal-bed methane (CBM), the petroleum ministry has added that private captive coal producers can also go for CBM exploration in their existing blocks.

The ministry wants to give the blocks producers hold for coal mining for CBM exploration on a nomination basis.

"The motive of the Cabinet note was to make the CIL stake sale more attractive, as the company was suffering from environmental issues as well as production constraints. Now, it wants to make it gainful for private captive coal producers, too," said a coal ministry official close to the development.

According to sources, the addition of private players happened within a week’s time, "with the knowledge of petroleum minister M Veerappa Moily".

The move would help captive users such as power, cement and iron & steel companies, which are holding mining rights for captive coal blocks. The major companies that may reap the benefits include Essar Power, JSW Steel, Reliance Energy, Tata Power and GVK Power, which got allotted after 1993.

This comes on the backdrop of the coal scam, in which the Comptroller and Auditor General of India (CAG) had highlighted that arbitrary allocation of coal blocks from 2004 to 2011 has cost the exchequer more than Rs 1.86 lakh crore.

"It is better to give them the right of first refusal, after a proper bidding process. Even if they allot CBM blocks to captive users, it should come at a price, otherwise it may lead to another scam. Moreover, there are already mine-developer-operator joint venture and alliance models, which the government can implement for captive blocks. As their rights were for coal mining, not gas exploration, even on nomination basis, it should not go away at a throw-away price," said a former Coal India executive.

The current policy would be a joint effort by the petroleum and coal ministry, the CBM policy adopted by the government in 1997 would be left untouched. The move would allow CIL to explore CBM in close to 4,50,000 hectares of area either leased or licensed under the Coal Mines (Nationalisation) Act.

Currently, the major CBM players in Indian CBM space include Great Eastern Energy Corporation, Essar Oil and Reliance Industries. The country is expected to produce more than 7.4 million standard cubic meters per day over the next couple of years.

"For exploring CBM in existing coal blocks, even CIL subsidiary CMPDI (Central Mine Planning & Design Institute Ltd) has not given a nod saying it is not a viable option. Hence, these players should be given the right to explore coal-mine methane. If those have virgin coal blocks wanting to explore CBM, it should be through NELP (New Exploration Licensing Policy) route only," said a senior CBM industry expert.