New Delhi: The coal ministry on Tuesday invited applications for commercial production of coal from eight blocks across seven states. The exercise was limited to state government entities.
Coal secretary Anil Swarup said the allotment of these blocks will help the ministry gauge the demand for commercial production and trading of coal, before it allows private companies to mine coal for trade purposes.
The government, which had to cancel the fourth round of auctions for captive coal mines in December 2015 due to lukewarm response, now wants to ascertain demand before taking steps to usher in more competition in the sector.
State-owned Coal India Ltd (CIL) is the sole commercial miner of coal right now. In 2015-16, CIL produced 536 million tonnes of coal, about 80% of domestic production.
“Allocation of coal mines to state entities is a step in the direction of allowing private commercial mining. We are testing the waters,” said Swarup.
The government will auction mines to private companies for commercial mining once the demand for the fuel picks up. Replacing diesel-power generation sets with power from the grid, improved financial health of power distribution companies post debt restructuring and a pick-up in economic growth will add to demand for electricity and, consequently, for coal.
Swarup said that faster growth in coal production vis-a-vis power demand had led to a slump in coal offtake.
“This is not the right time for auctioning coal mines as (debt-ridden) power distribution companies are not able to articulate the real demand,” he said. When the capacity utilization of power plants goes up, demand for coal will also pick up, he added.
Anticipating a pick-up in demand for the fuel, CIL has planned a capital investment of Rs 57,000 crore to double production to one billion tonnes by 2019-20.
Apart from the eight blocks for which applications have been invited from across the country, the ministry is already in the process of allocating eight more, where public sector companies from the states where the mines are located alone will be considered. All 16 mines will be allocated by September this year. They are located in Odisha, Maharashtra, Madhya Pradesh, West Bengal, Jharkhand, Telangana and Chhattisgarh.