Commercial coal mining opened for private sector

New Delhi: In a big reform initiative aimed at attracting global investment in the mining sector, the government on Thursday started auction of coal mines for commercial extraction by the private sector.

In all 41 mines with total geological coal reserve of 17 billion tonne is on offer under the first phase of commercial coal mine auctions. These include both large and small mines with peak rated capacities (PRC) ranging from 0.5 to 40 million tonne per annum (mtpa) of coal.

The cumulative PRC of all mines is 225 mtpa. The mines on offer are largely fully explored ones meaning that it could be brought to production immediately. Moreover, 4 coming coal mines are in offer that could provide input to the steel sector. The mines are located in five states of Chhattisgarh, Jharkhand, Madhya Pradesh, Maharashtra and Odisha. The commercial coal mining auctions are completely different from earlier regime of restricted sectors, use and price. Now, there are no such restrictions at all.

The proposed auctions have terms and conditions which are very liberal allowing new companies to participate in the bidding process, reduced upfront amount, adjustment of upfront amount against royalty, liberal efficiency parameters to encourage flexibility to operationalize the coal mines, transparent bidding process, 100 per cent FDI through automatic route allowed and reasonable financial terms and revenue sharing model based on National Coal Index.

Accordingly, there are no financial and technical criterion for bidders while floor price of coal mines has been set competitively at 4 per cent of revenue share. Plus, investors would have liberal exit option that could be exercised post lock-in period by just informing the nominated authority. For partially explored mines, investors could exit post completion of mandatory work programme.

The successful bidders also will have flexibility in coal production unlike past and have provision for incentives for early production and coal gasification. The winners could have 65 per cent of scheduled production on annual basis and 75 per cent of scheduled production over a block of 3 years.

There will also be complete freedom to numbers to use coal production for sale, captive consumption, sale to affiliates, coal gassification and exports. Moreover, exploitation rights for CBM and other minor minerals present in the coalfields would also be provided to miners.