Says pvt coal players will get windfall.
The Planning Commission’s proposal to allow sale of surplus coal from captive coal mines has come in for severe criticism from the coal ministry. The Commission had proposed permitting mining companies to sell excess production from such mines and keeping a part of the proceeds, to bridge the widening demand-supply gap in output.
In a note prepared for a meeting to be chaired by Prime Minister Manmohan Singh, the coal ministry says such a change would be illegal. It would also lead to windfall gains for private companies holding captive blocks, the ministry fears.
“The Planning Commission’s suggestion would be violative of the provisions of the Coal Mines Nationalisation Act, 1973, and will allow captive block holders to make huge profits, as the companies have been provided with coal assets almost free of cost,” the ministry has said in the note.
Coal mining is an exclusive domain of the state sector in India. Only government-owned Coal India Ltd (CIL) and Singareni Colleries Company Ltd are allowed to mine and sell coal in the open market.
Private companies are allowed to mine coal only for specific end-use requirement through captive blocks. Any surplus generated from these blocks is to be sold to the nearest CIL subsidiary, at a government-notified price.
The government has allocated 193 captive coal blocks over the past 18 years. However, only 28 of these have started production. These together produce 35 million tonnes annually, less than seven per cent of India’s total annual output of 530 mt.
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“Another problem with the proposal is that there is hardly any surplus generated in captive blocks. In fact, so far there has been only one case where a captive block holder has sold its production to Coal India,” a senior ministry official said.
The ministry also fears that if a part of captive coal reserves are diverted for sale in the market, the miners would never show interest in bringing up the end-use plants in the power, cement and steel sectors for which the blocks had been allocated.
The companies would also return to the government for making available reserves in future, after meeting their requirement. The proposal would also require approving new mining plans, which would consume considerable time. As a solution, the ministry has proposed hastening the Commercialisation of Coal Mining Bill, pending in Parliament since 2000.
“This is all the more important to attract largescale investments to explore coal and lignite in line with the New Exploration and Licensing Policy for development of oil and gas and introduction of state-of-the-art technology, particularly for underground mining,” the ministry has proposed.