KOLKATA (miningweekly.com) - The Indian government has taken another step towards opening up the coal mining sector to standalone miners by beginning the process of identifying suitable coal blocks.
According to Coal Ministry officials, the process of identifying the coal blocks to be put up for auction to private standalone mining companies, without any end-use restrictions, was expected to be complete by June or July.
With the Coal Mining Special Provisions Ordinance now in place, the government had the legal framework to auction coal blocks to domestic and foreign miners and only needed to make the necessary political decision and bring trade unions around to the opening-up of coal mining to private investment, officials said.
At present, producer Coal India Limited (CIL) dominated the Indian coal-mining sector, accounting for 80% of domestic supplies. Private companies in the cement, steel and thermal power generation sectors were permitted captive coal mining with stringent end-use restrictions wherein captive coal production was not permitted for merchant sales.
As the first step to rectifying this issue, the government was already in the process of auctioning 101 coal blocks to private and government-owned companies in the cement, steel and power sectors with concessions in end-use norms specifying that companies were permitted merchant sales of 20% of production.
However, the government’s next objective was to create a mining environment to attract domestic and foreign mining companies of the likes of BHP Billiton, Rio Tinto or Vale to enter the Indian coal sector, as opposed to just Indian miners, such as Essel Mining, the officials added.
It was noted that in the next stage around June-July, foreign miners registered in India would be permitted to participate in next auction round for which coal blocks were being identified.
Apart from the 101 coal blocks already put on the auction blocks, another 103 coal block mining licences, which were cancelled by the Supreme Court, would have to be put up for auction. Nearly half of these were expected to be offered to private investors for commercial mining.
But the government was also working on some restrictions including a ban on exports of coal and a regulated pricing regime to offer protection to government-owned CIL, the world’s largest coal miner, the official said.
According to a draft prepared by the Coal Ministry, setting a coal production target of 1.6-billion tonnes a year by 2020, it has been assumed that 200-million tonnes a year of production would have to come from private commercial miners other than CIL.
If such a target was to be achieved it would be imperative that government laid out a roadmap for attracting private standalone miners, foreign and domestic, into the coal sector, the officials said.