Cabinet relaxes norms to mine, sell coal; entry for foreign players eased

The Union Cabinet on Wednesday relaxed the qualification criteria and regulations for mining and selling coal in the country. With this, the entry of foreign players and non-coal dependent companies in the coal mining sector has been eased. So far, only companies involved in the power, metals and mining industry could participate in bidding for coal blocks.

The amended rules will also imply more sellers of coal, which is currently in the hands of state-owned Coal India Limited. Also, all end-use restrictions have been removed. Under the new regime, existing private coal block owners would be able to sell surplus coal in the open market.

The Centre has promulgated an Ordinance in Coal Mining Special Provisions (CMSP) Act, 2015, and also Mines & Minerals Development Act (MMDR), 1957, to introduce changes in the auction of coal blocks and their end-use relaxations. The Ordinance is yet to be signed by the President.

The announcement comes four years after the Centre enabled commercial mining and sale of coal by private companies under the CMSP Act, 2015. A year later, it approved the methodology for auctioning coal mines for commercial purposes to private companies. In 2019, around 25 blocks were earmarked for auction but the bidding did not take place.

The Coal Ministry had then allowed 25 per cent of coal to be sold in open market by prior owners, a move that was questioned by the Finance Ministry. 

Coal ministry officials said all such concerns have been addressed under the latest amendments to the rules.  

Addressing the media after the Cabinet meeting, Union Minister of Coal Pralhad Joshi said the coal sector was now open for foreign direct investments. “Previously there was a restriction that anyone who participates in the auction should have coal mine operation in India. That has been removed. Anybody can participate in coal auction,” he said. The Ministry of Coal is planning to offer the first tranche of coal under auction by March 31.

As reported earlier, the Centre might offer coal blocks only for commercial mining and sale. A K Jain, secretary, Ministry of Coal, said, “The companies which are not engaged in any coal-use industry can also participate in auction. They can mine and use coal for their own consumption, sell or for any other purposes. This flexibility has been introduced in the CMSP Act.”

In 2014, a Supreme Court decision cancelled all coal block allocations made over the past two decades. In 2015, the Centre offered 34 coal blocks in first ever e-auction held in three tranches. The coal blocks went to private companies, including Hindalco, Balco, Jindal, JSW, Adani, GMR, Essar, among others. This was for captive or own use in power, iron and steel sectors. This year, three tranches of coal auction were held after a hiatus of two years and nine blocks were successfully awarded.

Now, the government will also offer unexplored coal mines, as against only explored blocks earlier. In addition, the government plans to do away with the requirement of ‘previous approval’ to save time in commencing operation of mines. Coal ministry officials said the provision of Prospecting Licence-cum-Mining Lease (PL-cum-ML) had been introduced for the coal/lignite sector. This practice of PL cum ML is prevalent in the oil exploration and mineral mining sector where unexplored blocks are offered.

‘’This will help in increasing the available inventory of coal/lignite blocks for auction. By including partially explored blocks in the auction, higher number of blocks can be offered at an early date,” said a coal ministry official.

The move is expected to help the government cut down on coal import as well.

Reacting to the decision, Sajjan Jindal, Chairman and Managing Director of JSW Group, said in a Twitter message, “Huge reform announced by the government on commercial mining in coal. This will go a long way in reducing the coal imports which is over $15 billion a year.”

Mining boost

• Any company/industry can bid for coal blocks, mine and sell coal

• Foreign companies with Indian registration also allowed

• Existing coal block owners allowed to sell coal

• Unexplored mines to be auctioned