Coal news and updates

Govt plans discussion paper on commercial mining soon

The Ministry of Coal (MoC) is likely to put up a discussion paper on introduction of commercial coal mining in India in the next few days, a senior official told ICMW.

“The discussion paper is likely to be finalised in the next two-three days,” the official said.

Once the discussion paper is finalised, then the ministry will seek comments from stakeholders to fine tune it, the official added.

Last year, the Bharatiya Janata Party (BJP)-led NDA government had included an enabling provision in the Coal Ordinance to allow commercial mining in the country.

A section of the industry in the country had been arguing in favour of commercial mining to improve domestic coal availability and adhering to the suggestion, the government had incorporated an enabling resolution for the same.

The enabling resolution was opposed by trade unions who argued that commercial mining might impact Coal India Ltd (CIL)’s position and even a strike was called. However, ultimately, it seems, the government will go ahead with commercial mining.

ICMW understands that the proposal of the NDA government to introduce commercial mining in India may not have any impact on government monopoly CIL even as the success of such an endeavour looks doubtful at this point in time.

ICMW’s scepticism is based on past experience wherein nearly 212 captive blocks were given to a number of companies, but only a few could actually produce from those blocks because of severe delays in getting statutory clearances.

However, the situation has improved a bit since the last few months as statutory clearances are coming fast and if it continues to be like this in future also, then one can expect commercial mining to be successful.

But the question remains whether the blocks for commercial mining would be offered free of cost, as was the case with CIL, or there will be forward bidding for allotment of blocks.

An official of a leading private sector power generation company had a few months back argued that commercial mining in India may not be successful, unless a level playing field is provided or blocks are given free of cost to new entities.

“Unless the blocks are given free of cost, the new entities will not be able to compete with CIL prices,” the official had said.

However, an expert said, “I think CIL’s price should not be set as a benchmark for coal to be sold by commercial miners because CIL’s coal is cross-subsidised wherein they charge low price (lower than production cost) for coal that is mined through the underground route and slightly higher (much higher than the cost of mining) for coal mined through the open cast route.”

Elaborating further, he said, “If commercial miners are allowed to sell coal, that is mined through the open cast route, at CIL’s prices, they would be making abnormal profits and if the coal comes from underground mines, they may not be able to benchmark with CIL’s price because of the higher cost of production.”