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Coal India monopoly ends as India allows commercial mining of coal

The government has announced opening the coal sector for commercial mining, ending the government monopoly on the sector

  • Commercial coal mining will be done on revenue-sharing basis instead of the regime of fixed rupee/tonne

  • The government will introduce competition, transparency and private sector participation in the coal sector through a slew of measures

New Delhi: The government has announced opening the coal sector for commercial mining, ending the government monopoly on the sector. Amidst the slew of measures announced on Saturday as part of the fourth tranche of the economic package, Finance Minister Nirmala Sitharaman said that commercial mining will be done on a revenue-sharing basis instead of the regime of fixed rupee/tonne. The government will introduce competition, transparency and private sector participation in the coal sector through a slew of measures, the Ministry of Finance said in a statement.

50 coal blocks to be offered for commercial mining immediately

The revenue-sharing mechanism is being relaxed to allow any party to bid for a coal block and sell in the open market. “Entry norms will be liberalised. Nearly 50 blocks will be offered immediately for commercial mining. There will not be any eligibility conditions, only upfront payment with a ceiling will be provided,” said the official statement.

There will be an exploration-cum-production regime for partially explored blocks against the earlier provision of the auction of fully explored coal blocks. This will allow private sector participation in exploration. Production earlier than scheduled will be incentivised through rebate in revenue-share.

Diversified opportunities in coal sector

The government also aims to incentivise coal gasification/liquefaction through rebate in revenue share. “This will result in significantly lower environmental impact and also assist India in switching to a gas-based economy,” the Ministry of Finance said. 

Coal Bed Methane (CBM) extraction rights will be auctioned from state-run Coal India Limited’s coal mines. In order to allow ease of doing business, the government will undertake Mining Plan simplification. This will allow for an automatic 40 percent increase in annual production. Also, concessions in commercial terms have been given to Coal India’s consumers (relief worth Rs 5,000 crore offered), reserve price in auctions for non-power consumers has been reduced, credit terms have been eased, and lifting period has been enhanced.

Infrastructure development of Rs 50,000 cr

Infrastructure development of Rs 50,000 crore will be done for the evacuation of enhanced Coal India Limited’s target of 1 billion tonnes of coal production by 2023-24, plus coal production from private blocks. This will include Rs 18,000 crore worth of investment in the mechanised transfer of coal (conveyor belts) from mines to railway sidings. This measure will also help reduce environmental impact.