The cabinet Thursday approved the setting up of an independent coal regulator, the bill for which is also currently pending before parliament.
"The Cabinet Committee on Economic Affairs has given its nod to the proposal to set up a coal regulator", a union minister said here after a meeting of the CCEA.
Coal Minister Sriprakash Jaiswal had informed parliament last week that a non-statutory regulator for the coal sector would be set up through an executive order, as legislating on the subject would take time.
The regulator would determine the methodology for fixing coal prices, methods for testing and declaration of grades, specify procedures for coal sampling, adjudicate on disputes between parties and monitor mine closure plans.
It will, however, neither have the authority to allocate blocks nor determine prices of coal.
The regulator, the minister told parliament, was for both conserving resources in the sector as well as protecting the interests of coal consumers and producers.
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The bill comes in the context of a host of problems plaguing the sector, including production shortfalls that touched 135 million tonnes in the last fiscal.
Coal India (CIL) has a near monopoly of production, and the Competition Commission of India (CCI) in December penalised the state miner Rs.1,773.05 crore for abusing its dominant position.
CIL accounts for over 80 percent of domestic production, while private companies are allowed to mine coal only for captive use.
Consumers have complained to the competition watchdog about CIL's monopolistic manner of setting prices and terms of supply, and the poor quality of its coal.