The Government of India (GoI) has set in motion the first step of commercial coal mining in the country, a move that will enable coal mining and selling outside the ambit of Coal India Limited.
The Coal Ministry has decided to allot coal mines to states, which will mine and sell the resource to user-industries.
The Ministry has identified 16 coal mines with the cumulative capacity of 40 MnT that will be divided among host and non-host states. Interestingly, this will enable even states without coal mines to own coal mines in other states and use the resource commercially.
The Ministry is also planning to put in place a mechanism to involve private players in commercial coal mining.
The Supreme Court had last year cancelled all coal block allocations to states and implemented a new mechanism for allocating coal blocks to states. Under the erstwhile mechanism, states took the liberty to change the equity structure in favor of a mining development operator (MDO), thus transforming the MDO, which was usually a private company, as the owner of the block.
Under the guidelines of the new mechanism, states will have to apply for coal mines by citing their demand, expected sales and the sale plan. Joint ventures by states will be allowed only when the state utility bears the majority stake.
Besides, the states will have the freedom to decide beneficiaries and price of coal.
IMPACT ON CIL
Subsequent to the commercial mining and sale of 40 MnT, CIL is likely to lose sales of 7-8% of its annual production.
As a matter of fact, the commercial mining and sale are not likely to commence within FY17 as acquisition of the set of clearances, infrastructure facilities and evacuation facilities are not expected to be completed within this fiscal.
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