New Delhi: In an effort to remove the opaqueness and irregularities surrounding the award of so-called captive coal blocks, the government is introducing a Bill in the coming monsoon session of Parliament and wants to auction blocks with reserves of 15 billion tonnes after the legislation is in place.
Captive blocks are allotted to iron, steel, power and cement firms, which use the coal for their own plants. Mint had on 18 March highlighted significant irregularities in the process adopted for allotting coal blocks to power firms.
A government official, who did not wish to be identified, said the Minerals (Development and Regulation) Amendment Bill will be introduced in the monsoon session.
“Following the passage of the Bill, the process of awarding of coal blocks will be carried out in two parts. In the first part, advertisements will be placed in the newspapers calling for bids for the award of the blocks. Once the bidders are shortlisted on the eligibility criteria as laid down by the Coal Mines (Nationalization) Act, they will be then asked to submit the price bids. Whoever submits the highest bid will then be given the block. This competitive bidding criteria will help in streamlining the entire award process,” said H.C. Gupta, secretary, ministry of coal.
Many industry analysts and companies applying for captive coal blocks say that this is different from the earlier process, where the recommendations of the screening committee on coal block allotment were largely subjective.
Under the Coal Mines (Nationalization) Act, 1973, coal mining was largely reserved for the public sector.
Since then, subsequent amendments have allowed captive mining by private companies engaged in the production of iron, steel, power and cement.
A Mint investigation disclosed significant irregularities in the Union government’s October award to 31 power companies of mining rights for 15 coal blocks with reserves worth around Rs5.37 trillion.
In the award of the captive coal blocks for the powersector, the investigation had found that nine of the 31 companies were awarded rights despite being rejected in earlier stages of the bidding process for not meeting the government’s prescribed criteria.
In preparation for the auctions, the government is carving out 102 blocks with reserves of around 55 billion tonnes in coalfields across the country. Of these, Coal India Ltd, the state-owned coal company, will retain blocks accounting for 40 billion tonnes. The rest will be offered for captive mining.
One expert said the new Bill would accelerate development in the mining business.
“The same has happened in the Indian hydrocarbon sector. The mining sector has been constrained by arcane regulations, which has prevented any kind of development. The Bill will give more transparency and structure to the entire mining operations from prospecting to actual exploration,” said Anish De, chief executive officer at Mercados Asia, an energy consulting firm.
The annual award of coal blocks to government companies as well as captive power units operated by the power sector started in 1993.
Between 1993 and 2002, rights on a total of 19 blocks were allocated. Between 2002 and 2004, rights on an additional 25 blocks were allocated. And since the UnitedProgressive Alliance came to power in 2004, rights on around 165 blocks have been allotted.
According to the ministry of coal, between 1993 and 6 November 2007, coal blocks for the power sector were awarded to 62 companies, including some state-owned ones.