Home > Industry > Energy > Centre opens up coal sector, does away with end-use restriction

NEW DELHI : The Union cabinet on Wednesday approved opening up of coal mining and further disinvestments, apart from deciding that the Centre will shoulder 60% of the expense for the North East Gas Grid project. It also extended the validity period of mining lease clearances ending in 2020 by two years.

In an attempt to attract investments in coal mining, the Cabinet approved the promulgation of Mineral Laws (Amendment) Ordinance 2020. The ordinance allows coal mining by any company present in sectors other than steel and power, and does away with the captive end-use criteria. While the move will help create an efficient energy market, usher in competition and reduce coal imports, it may also bring an end to state-run Coal India Ltd’s (CIL) monopoly.

Despite having the world’s fourth largest coal reserves, India imported 235 million tonnes (mt) of coal last year, of which 135mt valued at 171,000 crore could have been met from domestic reserves, coal and mines minister Pralhad Joshi told reporters.

The move will also help India gain access to sophisticated technology for underground mining used by global miners. New Delhi’s move comes at a time when the window for fossil fuels is rapidly closing, and the global energy landscape evolving, with fundamental changes to the investment culture amid growing climate concerns.

“Under the Ordinance, requirement of previous approval in cases where allocation of blocks was made by Centre has been dispensed with to speed up the process of implementation of projects and ease of doing business," a government spokesperson said in a tweet.

It comes against the backdrop of India’s gross domestic product growth decelerating to a six-and-a-half-year-low of 4.5% in the September quarter amid slowing domestic and external demand.

The Centre has set a mining target of 1.5 billion tonnes of coal by 2020. Of this, 1 billion tonnes was to be from CIL and 500 million tonnes from non-CIL sources, in line with the government’s push to raise natural resources production to kickstart economic growth. This has now been revised down to 1 billion tonnes of coal by 2023-24.

“The government has been progressively liberalizing the coal sector over the last several months to attract new investments, and getting rid of this archaic end-use restriction was a key step. It is expected that the government will also address other procedural issues that add to time delays and upfront cost of developing a mine," Kameswara Rao, leader, energy, utilities and mining, PwC India, said in a statement.

As part of the NDA government’s disinvestment agenda, the Cabinet Committee on Economic Affairs gave ‘in-principle’ approval for strategic disinvestment of equity shareholding of Minerals & Metals Trading Corp. Ltd (49.78%), National Mineral Development Corp. Ltd (10.10%), MECON (0.68%), Bharat Heavy Electricals Ltd (0.68%) and two Odisha state government units—Industrial Promotion and Investment Corporation of Odisha Ltd (IPICOL) (12.00%) and Odisha Mining Corp. (OMC) (20.47%) in Neelachal Ispat Nigam Ltd.

The government has set an ambitious disinvestment target of 1.05 trillion for FY20, of which it has managed to garner only 17,364 crore so far.

In another major decision, the Centre will provide 5,559 crore for the construction of the North East Gas Grid project across Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, and Tripura.

The CCEA on Wednesday approved the marquee project of Indradhanush Gas Grid Ltd “with viability Gap Funding/Capital Grant at 60% of the estimated cost of 9,265 crore (Including interest during construction)."

Currently, India’s northeast is in turmoil due to protests against the contentious Citizenship (Amendment) Act.

“The Capital Grant will provide natural gas supplies to various types of consumers viz. Industrial, PNG (domestic), CNG (transport) etc. and would help in substituting the liquid fuels," the government said in a statement.

The 1,656-km gas pipeline project will help improve future geo-economics of the region and ensure uninterrupted natural gas supply to consumers.

Indradhanush Gas Grid is a joint venture of state-run Indian Oil Corporation Ltd, Oil and Natural Gas Corporation, GAIL (India) Ltd, Oil India Ltd and Numaligarh Refinery Ltd.

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