Methane search may light a fuse

Oil ministry wants to give private captive coal producers permit to look for coal-bed methane in their blocks

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

A ministry official close to the development said: “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.”

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 firms 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 had highlighted that arbitrary allocation of coal blocks from 2004 to 2011 has cost the exchequer more than Rs 1.86 lakh crore.

A former Coal India executive said, “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.”

The current move would be a joint effort by the petroleum and coal ministries. The CBM policy adopted by the government in 1997 would be left untouched.

The latest proposal would allow CIL to explore CBM in 450,000 hectares leased or licensed under the coal mines Act.

Major CBM players in India include Great Eastern Energy Corporation, Essar Oil and Reliance Industries. The country is expected to produce 7.4 million standard cubic metres a day over the next couple of years.

An industry expert said, “For exploring CBM in existing coal blocks, even CIL subsidiary 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.”

DRILLING WELL

* The Cabinet note was initially looking into allowing Kolkata-based Coal India Ltd to go for coal bed methane exploration in its existing blocks

* The move was to make the upcoming stake sale of Coal India more attractive for investors

* Petroleum ministry has allegedly put in the option that similar rights should be given to private captive coal producers, too

* The country is expected to produce 7.4 million standard cubic metres a day in the next couple of years