The auction of coal mines for commercial mining came up as an idea by Prime Minister Narendra Modi. It is one of the country’s biggest energy reforms. The auctions formalize the decision of the Cabinet Committee on Economic Affairs (CCEA) to award coal and lignite blocks on revenue sharing basis. This was a part of the government’s “Atmanirbhar Bharat” set of steps.
This will enable the country to combat the economic fallout from the coronavirus pandemic. The government will auction 41 coal mines to encourage private sector involvement and coal investment.
Coal end-users, such as companies in the iron and steel industries and power sectors, were permitted to bid for coal blocks in previous auctions. Commercial coal mining auctions are completely different from the previous restricted market, usage and price agreements. The auctions are subject to very liberal terms and conditions. This will encourage new businesses to join and a transparent bidding process. Hundred percent FDI will be permitted though automatic route. The financial and revenue share models will be based on the National Coal Index.
The coal mines that will be auctioned are located in Chhattisgarh, Jharkhand. The mines are fully and partly surveyed. The auction process will be a technical and financial involving a two-stage tendering process. These coal mines will need an investment of around 33,000 crores. This is because the auction will be used as a template for the distribution of natural household resources. The sale and use of coal from these mines will not be restricted.
The government has also set a goal of gasifying nearly 100 million tons of coal by 2030 besides the commercialization of coal mining. PM Modi said that he was informed about the four projects listed for this purpose. He also said that about Rs 20, 000 crores will be invested for coal gasification projects. The Prime Minister encouraged the players in the industry to analyze each commodity and sector and make it themselves.
The Mineral Laws (Amendment) Ordinance, 2020
The National Democratic Alliance (NDA) government has been trying to increase the production of Indian coal. In 2018, private entities were permitted to carry commercial mining. The government had approved the promulgation of Mineral Laws (amendment) Ordinance 2020. This is with a view to attracting investment in coal mining. It permitted any company present in sectors other than steel and power to mine coal and removed captive end-use requirements.
The Ordinance amends the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act) and the Coal Mines (Special Provisions) Act, 2015 (CMSP Act). The CMSP Act provides that mines whose allocation was canceled by the Supreme Court in 2014 shall be auctioned.
In order to participate in the auction of coal and lignite blocks, the ordinance clarifies that companies do not need any previous coal mining experience in India. Furthermore, the competitive auction of coal and lignite blocks will not apply in respect of mines considered in respect of:
(i)A government company or its co-enterprise for own consumption, selling or for any other purpose specified;
(ii) a company awarded the power project on the basis of a competitive tariff offer.
Benefits for the Economy
The Prime Minister said that a self-reliant India is to decrease dependence on imports and save foreign exchange by developing domestic resources. India, also was the largest exporter of commodities. Those of which are also now an import. To do so, Mr. Modi also said, it was important to operate holistically on every market, product and service. A big step in making India self-reliant in the energy sector was the auction for commercial mining.
The launch not only marked the implementation of reforms in coal mining, but also the commencement of lakhs of employment. This freed the industry from “lockdown” decades. The government has agreed to invest every half a million pounds on developing coal mines and transport facilities. This would also provide more employment for local people.
The Prime Minister said that coal sector reforms and investment would also contribute to ease tribals lives. The additional income generated by the production of coal will come in use for welfare programs. He said states who produce increased revenue will continue to obtain funding from the District Mineral Fund. This can develop important facilities in the surrounding areas.
Mr. Modi said it is an irony that India has the world’s fourth largest coal reserve and is the second largest producer of coal. Despite this India is the second largest coal importer. The industry is out of competition and lacks transparency, hindering investment and efficiency.
All parties concerned would benefit from the changes. It will make the industry independent and would support other industries such as coal, aluminum, fertilizer and cement. It will also help to improve energy generation.
A member of the union said that the trade unions of Coal India (CIL) are planning to go on a strike. This is against the decision of the government to open the coal market to private players.
The key demands of trade unions are that coal blocks stop for industrial mining and that consulting company CMPDIL not split from the Coal India. It also demanded payment of high-power committee wages to contractor workers, increase ceiling of gratuity from ₹10 lakhs to ₹20 lakhs to all workers retired between January 1, 2017, to March 28, 2018, at par with executives.
The drive to increase natural resources production to reactivate economic growth came at a time when the fossil fuels window shut down and the global energy world evolves. In the context of growing climate concerns, significant changes have taken place in investment culture in the energy sector. But, this will lead to improved competition in the energy sector and increased job opportunities.
But with thermal power generation falling, and many industry sources murmuring about the high stripping and overburden ratio of some of these blocks, the quality and quantum of private participation, in a world that wants to shun fossil fuels, will watch for it.
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