The Federation of Indian Mineral Industries (FIMI), the representative body of mineral industries in India, has opposed the government’s move to auction coal blocks for captive mining.
In a memorandum to minister of coal Sriprakash Jaiswal, FIMI highlighted that the auction process would drive up the cost of coal in the country unnecessarily and may render the block economically unviable, resulting in lost years before the block is forfeited. It has also termed auctioning as “illogical”.
FIMI’s reaction comes eight days after the minister’s announcement for auctioning coal blocks for captive mining, in Kolkata.
“There will be some changes in the policy for allocating the captive coal blocks to maintain transparency and to fetch a better price for the coal blocks. For this the government would amend the Mines and Minerals (Development and Regulation) Act, 1957,” the minister said.
This is because of the very nature of the exploration geology and methods of estimation of reserves whereby the actual coal reserve may fall short of the declared tonnage despite the “fullest” exploration of the block. Further, auctioning of coal blocks may lead to the coal blocks being purchased by financially strong parties, who may have little or no expertise in coal mining, FIMI said in the memorandum.
Experience in a tender to auction a chromite leasehold at Tangrapada in Orissa teaches us that after years of wrangling and litigation, the tender had to be finally cancelled.
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According to FIMI, a better model followed world over separates the activity of mining from the activity of coal consumption since each has its own specialisation. The model recommended is to invite large, professional Indian and international mining companies possessing the necessary mining experience to apply for coal blocks and to allocate the same based on well laid-out, transparent criteria. Shared allocation of blocks must be avoided.
The country should not target short term gains by obtaining higher revenues through auction but should focus on the long term gains through early and efficient production of coal resulting in creation of jobs, development of backward areas and royalties to the government over and above a reasonable “allocation fee” which should be fixed at a level proportionate to the size of the block and which would exclude non-serious players, it said.
This would ensure productivity, economies of scale, non-fragmentation of leaseholds (preventing loss of coal at the lease boundaries) and scientific mining with due attention to safety and environmental concerns. Consumers like power plants, cement plants among others may then obtain linkages from the nearest mining locations based on coal linkage allocations and pricing by the proposed coal regulator, FIMI pointed out.
The federation has also proposed that land acquisition should be facilitated to achieve the national priority of early coal production from allocated blocks. Towards this end, FIMI has suggested amendment of the Coal Bearing Areas (Acquisition and Development) Act Section 4 (1) to make its provisions applicable to all block allocates even from the private sector or the joint sector (PPP).