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Niti Aayog panel for a greater role of private sector in coal mining

Anupam Chatterjee
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With coal imports rising amid the widening gap between the production and consumption of the fuel, a high-level committee set up by the Niti Aayog is likely to suggest that all future auctions of coal blocks must be for commercial mining.  The draft report, reviewed by FE, argues against any more captive coal mines and pitches for amendments in several laws to encourage private participation in mining and remove ‘discrimination’ between the private and the public sector.

According to sources, the government think-tank has already made a presentation on its recommendation to coal secretary Sumanta Chaudhuri. The draft is yet to be finalised by Rajiv Kumar, vice chairman, Niti Aayog.

The committee was formed to “recommend legislative, statutory, procedural and regulatory changes” and “lay down a clear plan of action for simplification and Ease of Doing Business”.

Responding to FE’s query on this issue, a NITI Aayog official said that “only some preliminary discussion has taken place which was general in nature.”

The development comes with dismal levels of production by captive coal mines amid growing demand. These mines produced only 25.1 million tonne (MT) in FY19, much lower than the peak output of 43.2 MT in FY15 when the Supreme Court had cancelled the licences of 204 captive coal mines. Only 17 of the 29 operational blocks allocated through CMSP (auctioned: 14, allotted : 15) are currently under production. While 12 of the auctioned mines are under production, only five allotted blocks are currently extracting coal. Coal production from these mines inched up by 2.3% year-on-year in April-May to 4.12 MT.

The draft report attributed sub-optimal use of captive coal mines to lower requirement at the power plant to which they are tied up to. Arguing that such dynamics limit competition, the draft report of the committee recommends that auction/allotment for coal blocks should be done only for commercial purposes and no blocks should be allocated to any entity.

The committee has also recommended amendments to the Coal Bearing Act (CBA), 1957 to allow acquisition of such areas by the private sector players as well. The CBA currently allows special relaxations only to state-owned companies. The draft report said that such discrimination between the private and the public sector “hinders establishment of competitive market” and “puts private companies in financially disadvantageous position discouraging participation”.

The committee also recommended to revise the Mines and Minerals Development and Regulation Act (MMDR), 1957 and Coal Mines Special Provision Act (CMSP), 2015 to disallow central and state governments from reserving mining areas for PSUs and offer coal blocks for exploration-cum-production on revenue sharing basis. The CMSP was enacted for the allocation of the cancelled coal blocks. The MMDR was also amended in 2015 to allow auction of captive coal blocks.

To attract private players, the Cabinet, in February, 2018, had approved the auction methodology for commercial mining. Even that could not reignite interest of the private industry, and the last two coal auction rounds had to be cancelled as they could not even elicit three bidders to participate. In February, 2019, the Cabinet allowed private companies to sell up to 25% of production from captive coal mines in the open market.