Surplus coal may be sold at production cost

Fearing profit-making by private miners through the sale of surplus coal produced at captive mines, the government plans to impose a policy guideline asking captive mining companies to sell the surplus coal to Coal India (CIL) at production cost, or without any margin.

The proposal, if implemented, would make Sasan coal diversion by Reliance Power an exception, and discourage the production of surplus coal.

The proposal is part of the new policy on the usage of surplus coal, likely to be finalised by the government in a month. An empowered group of ministers (EGoM), headed by Finance Minister Pranab Mukherjee had, on April 29, decided to stick to an earlier decision to allow Reliance Power to divert surplus coal produced from mines allotted for the Sasan project in Madhya Pradesh to another project nearby.

 

"Any surplus coal produced shall be transferred to the nearest CIL subsidiary. The price payable by CIL to the allocatee would be either the cost of production or the notified price of CIL for the corresponding grade of coal, whichever is lower," said the draft policy floated by the coal ministry for inter-ministerial consultations. The draft policy also states the coal so transferred would be sold by CIL through an e-auction.

The government had made coal mining the exclusive domain of the public sector by enacting the Coal Mines Nationalisation Act in 1973. Later, through a series of amendments to the Act, it had allowed private companies to mine coal for specified captive use in end-use projects. Currently, 28 operational captive mines contribute about 35 million tonnes (Mt) of the total 530 Mt of coal produced in India.

Another legislation to allow the entry of private companies into coal mining and sale---the Commercialisation of Coal Mining Bill---has been hanging fire in Parliament since 2000. An EGoM had allowed Reliance Power to divert coal meant for the Sasan plant for use in the company's Chitrangi project in 2008, raking up a controversy over the special dispensation.

"Our worry is private companies with captive mines would now deliberately produce surplus output to make profits, circumventing the existing law that which does not allow these to profit through coal sales," said a senior coal ministry official, on condition of anonymity.