NMDC to be told to reapply for country's largest coal block

The coal ministry will invite a fresh application from state-owned miner NMDC Ltd for the allocation of India’s largest thermal coal block, Deocha Pachami, in West Bengal’s Birbhum district. The application, if favourably considered, could allow NMDC to float India’s largest coal mining company after Coal India, currently the near-monopoly producer.

The miner plans to rope in Coal India, which is sitting on 67-billion tonne reserves, and the West Bengal Mineral Development and Trading Corporation to float a joint venture to tap Deocha Pachami’s 19 billion tonnes of non-coking coal reserves by investing Rs 10,000 crore over three-four years.

“NMDC will be asked to apply afresh for the block under the government dispensation route after the detailed rules for coal block allocation are worked out within the next two months. Progress on the application has slowed, owing to the new legislation,” a senior coal ministry official told Business Standard. Parliament had passed an amendment to the Mines and Minerals Development and Regulation (MMDR) Act a year earlier. While the coal ministry had notified the rules for competitive bidding of coal blocks earlier this month, the details are yet to be worked out.

NMDC is hopeful of bagging the block soon. “The joint venture would be signed as soon as the block is given to us, which should happen this year. The block, when operational, would have a production capacity of 100 million tonnes per annum,” chairman N K Nanda told Business Standard. India currently produces 450 million tonnes of non-coking coal annually.

Despite its huge reserves, Deocha Pachami has so far remained unexplored, owing to its difficult geology. The block is covered by a 300-metre bed of hard basalt rock. However, NMDC has now developed technology to break the thick rock overlaying the massive coal reserve. “Our strategy is to utilise the overburden (broken rock) in developing the road infrastructure for offtake. This would help cover a part of the huge cost of the project,” Nanda said.

According to the plan, both Coal India and NMDC would have stakes of 40 per cent each in the joint venture, while the remaining 20 per cent would be held by the West Bengal Mineral Development and Trading Corporation. The two mining majors are among the government’s top cash-rich public sector undertakings.

Coal India is sitting on cash reserves of Rs 43,000 crore and coal reserves of 67 billion tonnes. The company’s production dropped 1.6 per cent to 335.9 million tonnes between April and January, compared with 341.4 million tonnes in the corresponding period of the previous year. The company plans to invest Rs 10,200 crore in the next financial year to start new projects and acquire mining assets abroad.