In a move to attract investments and strengthen domestic coal production, the Union Cabinet Chaired by Prime Minister Narendra Modi gave approval to promulgation of an ordinance to open up coal mining in the country to non-coal companies while removing restrictions on end-use of the fuel.
The Cabinet also gave approval for concluding auction of iron ore and other mineral mines before the expiry of their current mining lease on 31 March 2020, so as to avoid disruption in production.
It has approved promulgation of Mineral Laws (Amendment) Ordinance 2020 to amend Mines and Minerals (Development and Regulation) Act 1957 and Coal Mines (Special Provisions) Act 2015.
The order will amend the current proviso in the law which allows only companies in coal mining to bid for coal mines. As per the ordinance, any company meeting the minimum criteria will now be allowed to bid for coal mines, the first auction of which under liberalised rules will open within January 2020.
As many as 40 coal blocks will be up on auction in the new round. The move will help create an efficient energy market, usher in competition and reduce coal imports, while also ending the monopoly of state-owned Coal India. The country’s coal sector was nationalised in 1973.
However, Coal India will be strengthened and adequate blocks will be allocated to it to meet the target of producing one billion tonnes of coal by 2023.
Of the 204 coal blocks whose allocation was cancelled in 2014 by the Supreme Court, only 29 could be auctioned as some of these mines had end-use restrictions. The opening up of the mining to non-coal companies and removing the end-use restriction will pave way for the auction of these mines.
The country has the world’s fourth largest coal reserves, yet it imported 235 million tonne of coal for Rs 1.71 lakh crore in FY19. Of the total imports, around 100 million tonne is non-substitutable as they are tied to the power plant or user factories; the rest can be cut down.
Moreover, lease of 334 non-captive mineral mines is expiring on 31 March 2020. Of these, 46 mines, mostly in the states of Odisha and Karnataka, are operational. Also, of the 46 mines, 36 are iron ore.
The country can face a shortfall of 60 million tonne of iron ore if the mines are shut due to expiry of mining lease and the time taken in re-auctioning them.
The Cabinet gave nod to auctioning the expiring mines before 31 March 2020 as also transferring the current forest and environment clearances to the new winner, thereby saving two years needed in normal course to get those approvals.
In 2018, the government had allowed commercial mining by private entities. However, non-coal companies couldn’t participate in the auction. In August 2019, it announced 100 percent foreign direct investment (FDI) under the automatic route in coal mining for open sale, besides creating associated infrastructure.