Partially explored coal mines to get upfront payment waiver benefit

The coal ministry has extended the upfront payment waiver to partially explored coal blocks where successful bidders undertake underground mining exclusively, to encourage investment

In a significant move aimed at boosting underground mining, the coal ministry has extended the benefit of upfront payment waiver to partially-explored coal blocks as well.

 

Currently, companies undertaking underground mining in partially-explored blocks pay an upfront amount calculated at 0.2 per cent of the value of estimated geological reserves in the block.

 

The current methodology for auctioning blocks for the sale of coal under the Coal Mines (Special Provisions) Act and the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act) prescribes the floor percentage of revenue share as 4 per cent.

 

In addition, the allocatee company is required to deposit a 2 per cent upfront amount.

  

However, for coal mines classified for underground mining, the floor percentage of revenue share is set at 2 per cent along with the complete waiver of upfront payment.  

Partially-explored coal mines, opencast mines or mixed mines are offered for auction with a floor price of 4 per cent revenue share. This is because it cannot be pre-determined whether the mine is suitable for underground mining. 

Therefore, if the successful bidder undertakes underground mining in such coal mines after exploration, the upfront amount becomes payable under existing provisions.

 

In an order issued on Friday, the ministry acknowledged that underground mining requires higher initial investment, has a longer gestation period and is marked by higher cost of production, as compared to opencast mining.

 

However, environmental benefits of underground mining certainly override such financial metrics, making it the preferable method of mining.  

“In order to further incentivise the adoption of underground mining, the competent authority has approved the proposal to extend the benefit of waiver of the upfront amount to future successful bidders of partially-explored coal mines not classified for underground mining in the tender document at the time of auction, provided that the successful bidder undertakes mining exclusively through the underground method,” the ministry said.  

It added that such partially-explored coal mines will not be permitted to be converted into opencast or mixed mining at any stage during the life of the mine.  

The government had issued the original methodology for the auction of coal and lignite blocks and sale of coal and lignite in May 2020. The methodology has already been amended thrice.