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For decades, India's coal sector was shut to competition. (Photo: AFP)
For decades, India's coal sector was shut to competition. (Photo: AFP)

India launches commercial coal mine auctions

  • The 41 coal mines, up for auction, will require an investment of around 33,000 crore
  • The mines are expected to hit peak production of 225 million tonne and will account for 15% of India’s total coal output in 2025-26

NEW DELHI: In a big push to reforms, Prime Minister Narendra Modi on Thursday launched the auction for 41 coal mines for commercial mining.

Ending seven decades of policy curbs aimed at reviving economic growth, the auctions formalise the Cabinet Committee on Economic Affairs’ (CCEA) decision to award coal and lignite blocks on revenue sharing basis.

These coal mines will require an investment of around 33,000 crore, with the auctions serving as a template for allocation of domestic natural resources.

There will be no restriction on the sale and utilisation of coal from these mines. Earlier, blocks were awarded on a fixed payment per tonne basis which the government believed was impeding production.

According to the coal ministry, these 41 mines are expected to hit peak production of 225 million tonne (mt) and will account for around 15% of India’s total coal production in 2025-26. Commercial mining will add 20,000 crore annually to the state governments’ revenue. Also, the implementation of a National Coal Index will help India move towards a free market structure for coal.

Speaking at the launch of coal mines auction, Modi said India plans to gasify 100 mt of coal by 2030 which will require an investment of Rs20,000 crore.

The Centre's push to raise production of natural resources to revive economic growth comes at a time when the window for fossil fuels is closing and the global energy landscape is evolving. There have been fundamental changes in investment culture for the energy sector amid growing climate concerns.

Modi said self-reliance is not possible without a strong mining and mineral sector and added that while introducing coal reforms, the government has been kept in mind that India’s commitment to protect environment doesn’t become weak.

Coal gasification will help protect the environment, he said.

Despite having the world’s fourth largest coal reserves, India imports around 235 mt of coal, of which around 135 mt valued at Rs1,71,000 crore could have been met from domestic supply.

“This auction process marks the opening of Indian coal sector for commercial mining and will enable the country to achieve self-sufficiency in meeting its energy needs and provide thrust to economic development and employment generation," said coal, mines and Parliamentary affairs minister Pralhad Joshi at the launch.

The National Democratic Alliance (NDA) government has been trying to raise India's coal output. In 2018, it had allowed commercial mining by private entities. In an attempt to attract investments in coal mining, the government had approved the promulgation of Mineral Laws (Amendment) Ordinance 2020. It allowed coal mining by any company present in sectors other than steel and power, and did away with the captive end-use criteria.

The new strategy was articulated by India’s finance minister Nirmala Sitharaman while announcing that India will further open up commercial coal mining with revenue share arrangement to boost domestic production. Also, there will be no distinction between captive and non-captive mines that will allow transfer of mining leases. The announcement was part of the fourth tranche of the Rs21 trillion stimulus package to mitigate the economic fallout of the novel coronavirus pandemic.

The government is trying to promote coal gas gasification through rebate in revenue share, auctioning 50 new coal and 500 mineral blocks, and an investment of 50,000 crore to create transportation infrastructure for evacuating 1 billion tonnes of the fossil fuel from staterun Coal India's mines.

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