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Stage set for commercial coal mining by pvt firms

Ordinance paves way for private companies to bid for coal mining rights in India

Jyoti Mukul Shreya Jai  |  New Delhi 

In a first major move to open up the energy sector, the Centre has allowed commercial mining in the country. Till now only companies with end use projects in notified sectors could mine coal but with the promulgation of the Coal Mines (Special Provisions) Ordinance, the NDA government has set the stage for pure mining companies like Rio Tinto and BHP Billiton to bid for coal mining rights in India.

Through the ordinance, the government has added enabling provisions in the Coal Mines (Nationalisation) (CMN) Act 1973 and the Mines and Minerals (Development and Regulation) Act 1957.

A senior official said the auction would give coal blocks for end-use but "under law, it is now permissible to mine coal for commercial purposes". He said a huge untapped capacity of coal, along with unmet needs of several sectors, made it pertinent to allow commercial sale of coal by private miners.

The legal framework for coal mining flows from the CMN Act and the MMDR Act. While the CMN Act was enacted when the Indira Gandhi government took over coal mining operations from the private sector in the 1970s, the MMDR Act vests the authority of giving out mining rights on state governments.

The ordinance has inserted Section 3A in the CMN Act to enable join ventures formed by the central and state governments and their companies, and any company, to carry on mining operations in India "in any form either for own consumption, sale or for any other purpose", in accordance with the licence granted by the state government.

The ordinance classifies mines and their assets in three schedules. The first one includes all 204 mines deallocated by the Supreme Court recently, the coal bearing land acquired by previous allottees of these mines and the mining infrastructure. The second schedule comprises 42 mines mentioned in the first one but which are producing coal and for which the apex court has allowed a six-month grace period. The third schedule includes 32 mines that are in various stages of development. The government is empowered to include more mines in this list.

While all companies can bid for Schedule-I mines, bidding for the second and third category will be open to companies engaged in specified end uses of power, cement and steel. "In relation to Schedule-II coal mines (operational coal mines), the successful bidder, which was a prior allottee, shall continue coal mining operations after the appointed date in terms of the approved mining plan," said the ordinance.

The government's move was criticised by the Communist Party of India (Marxist), saying the ordinance nullified coal nationalisation. "Coal was nationalised as a precious national asset required for the country's development, especially to provide energy resources to the people. By an open-market e-auction, this objective will be negated. In any case, such a decision cannot be taken unless Parliament enacts legislation nullifying the 1973 Act," it said in a statement.

Under Indian Constitution, the government is empowered to enact a law through an ordinance signed by the President without going through the legislative process. Though such a law ceases to operate six weeks from the reassembly of Parliament, it has the same force and effect as an Act of Parliament.

The Union Cabinet had on Monday approved the ordinance, which was later signed by President Pranab Mukherjee. The government will appoint a designated authority to take possession of land used for coal mining operations, with discretionary power to "direct the prior allottees to provide the requisite manpower, as may be necessary, to ensure continuity in coal mining operations and production of coal."

Govt has broken 41-year state monopoly in coal mining and paved the way for opening the sector for commercial mining by private companies, which could mine and sell coal apart from captive usage
Competition for CIL
  • With the move, state-run Coal India is set to face competition
  • After introducing “mining operations for own consumption, sale or for any other purpose” in the Coal Mines (Nationalisation) Act 1973, Indian and foreign companies, state and private joint ventures are now entitled to mine coal for commercial sales
  • State utilities allowed to form JVs for technical assistance
  • Successful bidders allowed to mutually supply coal to each other
Up for auction
  • Around 204 coal blocks up for e-auction
  • 42 operational coal blocks and 32 about-to-produce blocks to be pooled for first phase of e-auction

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First Published: Thu, October 23 2014. 00:59 IST