Govt likely to remove 50% cap on sales of coal from captive mines

Under the current provisions, captive mine operators are allowed to sell only up to 50 per cent of their annual coal or lignite output after meeting the requirements of their linked end-use plants

The central government has proposed removing the 50 per cent ceiling on the sale of coal and lignite produced from captive mines, a move aimed at clearing accumulated stockpiles and increasing mineral availability in the market. 

 

This is part of a series of reforms proposed in a notice of public consultation by the coal ministry through amendments to the Mines and Minerals Development and Regulation (MMDR) Act.

 

Under the current provisions, captive-mine operators are allowed to sell up to 50 per cent of their annual coal or lignite output after meeting the requirements of their linked end-use plants.

 

The domestic industry and representatives of state governments have pointed out that more than half the extracted mineral remains unutilised, leading to large legacy dumps accumulating at sites of mines. These stockpiles pose environmental and safety risks and occupy space, particularly in smaller mines.

 

The ministry has proposed removing the ceiling to allow the sale of such legacy stocks in the open market, which will be in line with the amendments made for non-coal minerals under the MMDR Amendment Act, 2025.

 

By allowing relaxation in end-use conditions, the proposed amendments also seek to provide flexibility to state-run companies and corporations where coal or lignite produced from captive mines cannot be supplied to linked end-use plants due to logistical or infrastructure constraints.

 

“Sales of such minerals may generate proportional increases in royalties, District Mineral Foundation (DMF) and National Mineral Exploration Trust (NMET) contributions which may strengthen the fiscal position of mineral-bearing States,” the ministry said.

 

The proposed amendment may enhance market supply, reduce shortages, stabilise prices, and help meet growing industrial and infrastructure needs, which would contribute to national self-reliance and reduced import dependence, it added.

 

Beyond captive sales, the ministry has proposed recognising coal gasification as part of “mining operations” under the MMDR Act. The amendment will explicitly include the conversion of coal or lignite into gas within the definition of mining operations, providing regulatory clarity for coal gasification projects.

 

Coal gasification converts coal into synthetic gas, which can be used for power generation, fertilisers, and chemicals, and is seen as a cleaner alternative to direct coal combustion.

 

Another key proposal involves reviewing the maximum area for prospecting licences and mining leases under Section 6 of the Act. The current provision in the Act gives a limit of 25 square kilometres for prospecting licences and 10 square kilometres for mining leases.

 

The ministry said these ceilings no longer reflected the scale and technological requirements of modern, mechanised mining operations. It has invited suggestions on revised limits suitable for contemporary mining needs.

 

The Centre has also proposed extending the maximum tenure of coal and lignite mining leases from 30 years to 50 years. The move will eliminate the requirement for lease renewals, which creates an administrative burden and uncertainty in long-term mine planning.

 

The existing leases will be governed by current provisions, while new leases can be for 50 years at the outside, based on the life of the mine.

 

Additionally, the ministry has proposed strengthening measures to curb illegal coal mining. It said enforcement mechanisms under the MMDR Act and other laws had gaps despite the deployment of security forces and technology-driven monitoring systems.

 

The proposed review will examine the legal, administrative, and technological framework, including the powers of executives of coal companies and the security personnel, to better address the illegal mining, transportation, and storage of coal. 

The proposed amendments follow stakeholder consultations in August and September with coal block allottees, state governments, public-sector undertakings, and participants from private companies.