KOLKATA (miningweekly.com) – In a first step that would partially blur the distinction between captive and commercial coal mining, India’s Coal Ministry will amend mining legislation to enable companies free merchant sale of coal in the open market.

According to officials, the Coal Ministry will initiate amendments to the Mines and Minerals (Development and Regulation) Act (MMDRA) 2015 that will provide legislative backing to companies allotted captive coal blocks to offer the entire volume of coal produced for merchant sale.

However, the window for free sale of coal produced will differ between coal blocks allotted to private companies through the auction route and blocks allotted to government companies through the preferential allotment route.

In the case of captive coal blocks secured through competitive bidding at auctions by private companies, the latter will need to consume 75% of the production and can offer 25% for free sale. However, should companies be able to make out a case that its end-use plants are unable to consume the entire 75% of production, the balance can be offered to State-run miner Coal India Limited at a price notified by the latter.

Government companies allotted coal blocks through the preferential allotment route will get greater freedom under the legislative amendments and will be able to offer the entire production volume for free sale in the open market, at market determined prices, officials say.

The proposed amendments to the MMDRA 2015 will also ensure that mining leaseholders will not need to get mandatory environment clearances from the state government where mining blocks are located, with the Coal Ministry reckoning on a six- to twelve-month-reduced development time.

The Coal Ministry earlier this month announced the auctioning of 27 coal blocks for end-user industries alongside the allocation of 15 coal blocks to government companies under the preferential dispensation rules.

“At peak rated capacities, these 42 coal blocks will produce approximately 70-million tons a year,” the Ministry statement announcing the auction said, adding that the auctioning would be conducted on the State-run MSTC’s (formerly Metal Scrap Trading Corporation) electronic platform.

The tweaking of the mining legislation should be viewed against the backdrop of the government earlier this year approving a policy decision opening up coal mining for standalone mining companies. However, the auction of coal blocks exclusively for mining companies – domestic and foreign – permitting free sale of 100% of production and free pricing, was cancelled on an expected poor response from standalone mining companies.

Hence, the Coal Ministry feels that it will be a better alternative to permit free sale of coal by existing captive coal mining companies along with end-user industries and government companies, including state thermal power generators' free sale of coal from their assets, officials say.