Govt to allow commercial mining to central, state PSUs

Coal India to lose monopoly as other central PSUs will also be given commercial mining rights

Taking a step forward to opening the coal sector, the Narendra Modi-government is set to allow commercial mining — a right currently enjoyed by only Coal India (CIL) — by other public sector utilities (PSUs). Apart from state governments, central PSUs such as NMDC might also be given commercial coal mining rights.

“We will be giving coal blocks for commercial mining to state entities in the coming days,” said Coal Secretary Anil Swarup, here on Sunday.

Responding to a question on why the likes of NMDC were not being given commercial mining rights, during an interaction with members of the Coal Consumers Association of India, Swarup said: “We will be giving commercial mining rights to all state entities, both central and state PSUs.” NMDC, a Government of India-controlled company, is the largest iron ore producer and exporter, producing about 30 million tonnes a year.

The Coal Mines (Special Provisions) Bill, 2015, recently passed in Parliament, has enabling provisions for commercial mining and sale of coal by even private players.

“We want to go step-by-step. First, we auctioned mines that need it for end-use. Then, we want to give commercial mining rights to state entities. Then, we might give it to private players. There are some economists who might feel we should give mining rights straightaway to private players. The legislation allows us but it does not mean we do it that way, ” Swarup told Business Standard.

In the first go, states that are already mining coal such as Odisha, Chhattisgarh and West Bengal are likely to be given blocks for commercial mining and sale. According to officials, this could happen by June 30.

“Coal block auction is a classic example of cooperative federalism because the Centre is not getting a single penny out of this auction. It is entirely going to the states. It is bringing the Centre and states closer in terms of understanding how businesses should be conducted. It is in that spirit that we want to give commercial mining rights to state governments,” Swarup added.

The aim behind this is to meet the fuel demand of small local units. “A number of small entities that cannot bid for a coal block auction because their requirement is smaller. However, they also need coal. In one way, CIL provides them the coal but we felt the state governments are localised. If they mine and they can give linkages to smaller units, it would be much easier than Coal India doing it. So, we are looking at the option of allocating coal mines to state entities, which in turn do commercial mining and sell to these smaller consumers.”

While this will end CIL's monopoly, this is not the first time state governments are trying their hands at commercial mining. In 1999, following an amendment to the Coal Mines (Nationalisation) Act, 1973, Maharashtra State Mining Corporation had made an unsuccessful attempt. “Yes, the model had failed earlier, but there is a sense of confidence around with this coal block auction. We want to make use of this confidence,” said Swarup.

This assumes importance in the sense that the government is contemplating giving commercial mining rights to other central PSUs than CIL — a move which could be a step forward to open the sector to private and foreign players.