Home/ News / India/  CIL to auction shut mines as heatwave fuels power crisis

NEW DELHI : Coal India Ltd (CIL) will invite bids from the private sector to reopen 20 closed mines in the next few weeks, two people aware of the matter said, outlining a move to revive pits once considered unprofitable as a severe heatwave drives demand for power.

State-owned CIL has finalized a revenue-sharing model for the mines which are largely unremunerative and underground. It is preparing to invite tenders from private sector power producers, including those depending on imported fuel, the people cited above said on condition of anonymity.

“Bids for the first set of closed mines of CIL may come within a few weeks or early next month. This pilot may be followed up with over 200 mines being brought under auctioning in phases," one of the people said.

Queries sent to the coal ministry and CIL did not elicit a response till press time. A coal ministry official, however, said seeking anonymity, that the process of identifying the mines is on. Once all the mines are auctioned, they will have the potential to add about 150 million tonnes of coal annually -- sufficient to run all power projects at stipulated capacities, irrespective of surges in power demand.

In February, the coal ministry held a stakeholders’ consultation with private companies, which was attended by Essel Mining, Adani, Tata, JSW and JSPL. Since some of these companies also run power plants using imported fuel, access to domestic coal, which is 150-200% cheaper, may attract them. The auction plan has generated good investor interest from these companies.

The coal ministry has made the bidding process easier to ensure the auction sails through. There is no minimum technical criteria for bidders, including the requirement of the firm’s minimum net worth to qualify for bids. A bank guarantee would be sufficient to participate.

“With the mine developer and operator (MDO) model already existing, companies bidding for shut mines need not be technically qualified to do the mining work and the same could be outsourced on payment of a fee," said the coal ministry official.

The auction of closed mines will follow the MDO model that will need bidders to share revenue share with the government. The mines’ ownership will remain with CIL, and winning bidders will extract the coal for sale.

The 20 mines to be auctioned in first phase are spread over five subsidiaries of CIL. The extractable reserve of these mines is about 380 million tonnes, with an annual production potential of 30 million tonnes. A few of the mines have been shut since 1999, while some work is going on at some of the others. CIL has closed nearly 100 mines in the last 4-5 years, while a similar number remains abandoned due to the high cost of extracting coal and serious technical challenges for mining.

With new technologies brought by private miners, these challenges are expected to be overcome. Higher coal production is expected to help restore power supply in the country, as a rise in demand this year due to an early onset of summer resulted in a crisis-like situation with fuel-starved power plants struggling to meet demand.

India’s the total coal production stood at 772.59 million tonnes (mt) in 2021-22. The targeted production for FY23 is around 880 mt. With the addition of coal from abandoned mines this number could go up to 900 mt by the end of this year.

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Updated: 17 May 2022, 06:18 AM IST
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