Cabinet allows states to mine & sell coal, ends monopoly of Centre

Decision ends monopoly of Centre

Ending the 41-year-old monopoly of the central government over mining and sale of coal, the Cabinet Committee of Economic Affairs (CCEA) approved the allotment of coal mines to states for mining and commercial sale to medium and small industries in their state.

The statement of the government said CCEA gave its approval for allotting coal mines to central and state public sector undertakings for sale of coal, especially to medium, small and cottage industries, under the provisions of the Coal Mines (Special Provisions) Act, 2015.

Business Standard had earlier reported that the ministry of coal would allot non-operational mines to state governments for commercial mining and sale of coal to respective utilities for end-use in power, iron, steel, cement and allied sectors.

This move is likely to benefit the mineral-rich states to earn surplus revenue, which were until now earning royalty from private companies mining coal for captive use. This is pursuant to the enabling act on commercial mining and sale of coal in the new Coal Ordinance (Special Provisions), 2014.

Currently, states are allotted coal blocks but with specified end-use such as power production, steel and iron production etc.

“Consequent to this Cabinet decision, such coal blocks will not be having any specified use. So, the coal blocks which the states would mine, in turn, would be able to allot that coal to any industry. This will ultimately benefit the medium and small scale industries, including small power plants, which can’t source coal from Coal India,” Anil Swarup, secretary, ministry of coal, told Business Standard.

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The government’s statement said this shall also enhance domestic production of coal to meet the demand of national economy, thereby reducing import. The coal-bearing states shall be getting additional revenue from such coal mines.

“The revenue would be equal to the amount of royalty on the quantity of coal produced on a monthly basis during the lease period/life of the mine, as well as one-time upfront payment, which is 10 per cent of the intrinsic value of coal in the mine in three installments in the first year of allotment,” said the statement.

It is expected that the incremental coal produce from such coal mines would cater to the unmet demand of the coal in the country, especially of medium, small and micro industries, and bridge the gap considerably between demand and supply.

Gasification in coal

In another key decision, the CCEA approved a policy framework for development of underground coal gasification  in coal and lignite bearing areas in the country. A policy based on revenue sharing will be adopted for offering the blocks through competitive bidding. Over the next two years, some explored blocks will be identified for offer.

UCG is a method of extraction of energy from coal/lignite resources which are otherwise regarded as uneconomical to work through conventional mining methods. In the perspective of

CCEA allowed ministry of coal to engage a consultant for development of the contract document. For development of bid documents, work programme, conducting the bidding process etc., Central Mine Planning and Design Institute Limited (CMPDIL) will be the nodal agency, said CCEA.