In March 2020, the government of India passed a bill, Mineral law (Amendment) Bill that removed end-use restrictions for participating in coal mine auctions and open up the coal sector fully for commercial mining by domestic and global companies.
Significance of these amendments
This bill has been passed for amendments in Mines & Mineral (Development and Regulation) Act 1957 and The Coal Mines Special Provisions Act, 2015 (CMSPA).
Under this bill, dozens of coal mines in India with abundant reserves of the fuel are ready to be offered to the private players. This is also likely to attract FDI in the sector, which has largely been a monopoly of state-owned Coal India (CIL) – the largest coal miner in the world.
The amended provisions provide that companies which do not possess any prior coal mining experience in India or have mining experience in other minerals or in other countries can participate in auction of coal/lignite blocks.
The coal ministry planned to start the commercial coal auctions in various tranches with first auction to be held in March’20 (could not be held due to COVID-19). It has released a list of 84 coal mines with about reserves of 22,360 million tonnes identified for commercial coal mining.
These included about ten mines with reserves of more than 500 million tonnes that are likely to be eyed by major Indian and overseas firms such as Adani Group, JSW Energy, Peabody, BHP Billiton and Rio Tinto.
Ease of doing business
Further in order to ensure smooth functioning of coal blocks allocation process, Ministry of Coal (MoC) has recently launched a Project Monitoring Unit (PMU) for facilitation of early operationalisation of coal mines allocated by the Central Government. This is an important step forward to promote Ease of Doing Business as it will hand-hold and support Coal mines allocatees in obtaining timely approval/permissions to operationalise the mines.
PMU has been launched for helping the allocatees of coal mines in obtaining various clearances required from the Central/State government authorities for operationalization of coal mines. This will lead to ramping up of coal production in the country. This move is also expected to go a long way in attracting bidders for the ensuing auction round of commercial blocks.
Timeline of past events
Till 1993, coal mines in India were nationalised permitting only public sector to have control over coal mines which resulted in the monopoly of Coal India Ltd in the domestic sector.
In 1993, the Nationalisation Act was amended to allow private sector participation in coal mining activities but only for captive purposes in certain industries like steel, power, cement resulting in limited participation of private players and continued monopoly of Coal India.
In 2012, CAG published its report stating that the coal blocks allocated between 1993-2010 did not followed a transparent method of coal allocation and lacked its objectivity.
In 2014, Supreme Court cancelled the allotment of all the coal blocks between 1993-2010 with few exceptions.
In 2015, CMSPA was introduced to deal with cancelled coal blocks. This act allowed companies having prior experience and already engaged in coal mining in India to participate in the auction of cancelled coal mines either for its own consumption or sale.
However, CMSPA had a drawback that it did not result in optimal utilisation of coal in the country given that its use was dependent on the cyclical nature of the industry for which a coal block was allocated. Thus, the GoI took a note of these issues and approved for the changes in CMSPA in 2018 which were officially finalised and passed in the form of bill in March 2020.
Now the launch of PMU on 30 Apr’20 will further facilitate coal mines allocatees to obtain timely approvals for operationalising the mines and also will also boost confidence to the participating companies in the upcoming auction for commercial mining.
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