Govt allows commercial coal mining by private firms

New Delhi: The Union cabinet chaired by Prime Minister Narendra Modi on Tuesday decided to open up the coal sector to commercial mining by private entities. The game-changing move ends state-backed Coal India Ltd’s (CIL) monopoly and enables power, cement and steel producers to access fuel more efficiently.

The move is set to usher in competition in coal supply, reduce coal imports and help stressed power plants to attempt a turnaround through better fuel management.

An official statement described the decision as “the most ambitious coal sector reform since the nationalisation of this sector in 1973”.

There will be no end-use restriction as far as output of the auctioned mines are concerned. Under private commercial mining modalities approved by the cabinet, coal blocks will be allocated by “ascending forward auction” in which the winner will be determined by the price per tonne of coal offered to the state government where the mine is located. “There shall be no restriction on the sale and/or utilization of coal from the coal mine,” said the statement.

An enabling provision for commercial coal mining by private players was included in the Coal Mines (Special Provisions) Act, 2015, which the National Democratic Alliance (NDA) government had brought in to replace administrative allocation of coal blocks with auction after the Supreme Court had in 2014 cancelled 204 coal blocks allocated to various state and private companies.

The official statement said the methodology approved by cabinet on Tuesday gives highest priority to transparency, ease of doing business and ensures that natural resources are used for national development. The move is also expected to allow the use of best possible technology in the sector, drive investments and create direct and indirect employment in coal-bearing areas, it said.

“This is a game changer across multiple sectors. Power generators can use commercial coal to improve margins or availability, and as merchant prices fall, utilities and manufacturing sector too will benefit from lower energy costs,” said Kameswara Rao, partner, PwC India. Rao said that new owners of distressed assets need no longer risk e-auction supplies as commercial coal offers a credible strategy to revive those projects.

The government expects revenue from private commercial mining to help in the development of backward areas, especially in the eastern part of the country.

Meanwhile, the cabinet committee on economic affairs (CCEA) approved infrastructure projects worth Rs15,700 crore, including railways and national highways.

The committee gave its nod for railway projects worth Rs11,660 crore which included doubling of rail lines along with electrification and a new railway line in Bihar, Odisha, Uttar Pradesh and Madhya Pradesh.

The projects approved include 116.95-km long Bhatni-Aurnihar line doubling with electrification at a cost of Rs1,301 crore to decongest the Mughalsarai-Allahabad route, and easing rail connectivity to the prime ,inister’ s constituency Varanasi.

Other doubling and electrification projects approved are 100.6km Muzaffarpur-Sagauli, 109.7km Sagauli-Valmiki Nagar, 425km Jhansi-Manikpur link and Bhimsen-Khairar.

The CCEA also approved a new railway project in poll-bound Odisha, where a 130km long new railway line will be laid from Odisha’s Jeypore to Malkangiri, both left-wing extremism (LWE) affected districts, at a cost of Rs2,676.11 crore. The project will be completed by 2021-22. At present, there is no railway connectivity with Malkangiri and the new line will provide basic infrastructure support for the development of area.

The two national highway projects approved include construction of a 4.5km long tunnel on Dharasu-Yamunotri in Uttarakhand and six-laning of the 60km Nidagatta-Mysuru highway at Rs4,040 crore.

Railway minister Piyush Goyal said, “The railway projects will create employment for 211 lakh mandays and would be rolled out soon.”