Coal is the most vital fossil fuel in India and accounts for about 55% of India’s power requires. Coal has contributed considerably to India’s industrial heritage ever considering that the introduction of steam locomotives in 1853, and continues to do so, due to India’s ever rising power consumption and requires. Via a sustained programme of investment and higher thrust on application of contemporary technologies, it has been doable to raise the production of coal from about 70 million tonnes at the time of nationalisation in the early 1970’s to about 478.18 million tonnes in 2007. It is envisaged that India’s existing coal production of more than 450 million tonnes would go more than 600 million tonnes by 2012, requiring an investment outlay of upto about $15 billion.
Coal mining was brought beneath the public sector amongst 1971- 1973 with the passing of the Coal Mines (Nationalisation) Act, 1973. Nationalisation was completed in two phases the initial with coking coal mines (by The Coking Coal Mines (Nationalisation) Act, 1972, beneath which coking coal mines and coke oven plants other than these with the Tata Iron & Steel Business Restricted and Indian Iron & Steel Business Restricted, have been nationalised in Might, 1972) and then with non-coking coal mines in 1973, with the enactment of the Coal Mines (Nationalisation) Act, 1973 (hereafter the “1973 Act”), which continues to be the Central legislation figuring out the eligibility of coal mining in India. The 1973 Act categorically states that “no individual, other than the central government or a government organization or a corporation owned, managed or controlled by the Central Government shall carry on coal mining operation in India, in any kind.”
India’s Coal Reserves
As a outcome of exploration carried out up to the depth of 1,200m, as on April 1 2009, India has estimated tough coal reserves of about 267.21 billion tonnes – 1 of the richest in the globe, of which 105.82 billion tonnes are verified.
The Ministry of Coal has the general duty of figuring out policies and methods in respect of exploration and improvement of coal and lignite reserves and sanctioning of vital projects. These crucial functions are exercised by means of its public sector undertakings, namely, Coal India Restricted (“CIL“) and Neyveli Lignite Corporation Restricted (“NLC“) and Singareni Collieries Business Restricted (“SSCL“).
Coal India Restricted
The Coal Mines Authority Ltd. (“CMAL“) was set up in 1973 to operate the nationalised non-coking coal mines. In September 1975, the nationalised coal business was restructured with the establishment of CIL. CIL now has eight subsidiary organizations. At present, with its monopolistic position, CIL accounts for 85% of coal production, followed by SCCL (eight.five%), and captive producers (six.five%).
Private Sector Investment
The 1973 Act was amended in 1976 terminating all mining leases on coal held by private lessees to enable (a) captive mining by private organizations engaged in the production of iron and steel, and (b) sub-leasing to private parties of isolated smaller pockets not amenable to financial improvement and not requiring rail transport.
In 1993, the 1973 Act was additional amended to enable captive coal mining in the private sector for energy generation, washing of coal obtained from a mine and such other finish makes use of as notified by the Central Government from time to time. Coal gasification and coal liquefaction have also been notified as specified finish makes use of.
In March 1996, the Central Government permitted captive mining of coal for production of cement. The restriction of captive mining does not apply to state-owned coal mineral improvement undertakings. Industrial coal sales can legally only be undertaken by and by means of public sector coal organizations (and their subsidiaries) and coal created from captive mines by the private sector can not be sold on the open marketplace.
In February 1997, the cabinet authorized a proposal to amend the 1973 Act to enable non-captive coal mining, which met with stiff opposition from trade unions, who expressed issues that pre-nationalization ills like unscientific mining practices, environmental degradation and labour exploitation, would re-take place. Due to this, it took at least 3 years for the Bill to be re-formulated immediately after taking care of the issues of the trade unions, and it was introduced in Parliament in 2000. The Bill is, nevertheless, however to be passed.
Foreign Direct Investment
Presently, foreign direct investment has been permitted upto 100% beneath the automatic route as follows:
- Coal and lignite mining for captive consumption by energy projects, iron, steel and cement units and other eligible activities permitted beneath and topic to provisions of the 1973 Act
- Setting up coal processing plantslike washeries topic to thecondition that the Indian organization will notundertake coal mining and will not sellwashed coal or sized coal from itscoal processing plants in the openmarket. In addition, the Indian organization will provide the washedor sized coal to these entities who aresupplying raw coal to coal processing plants for washing or sizing.
Allocation of Coal Blocks
Below the current provisions of the 1973 Act, coal blocks for captive mining are allocated to public/private organizations engaged inmanufacture of iron and steel, generation of energy, coal washery and production of cement. Allocationof captive mining blocks is decided by an inter ministerial and inter governmental physique identified as the Screening Committee, headed by the Secretary,Ministry of Coal. Even though there are detailed suggestions for the allocation of coal blocks (as effectively as for blocks for underground coal gasification mines), it is now proposed to introduce an auction primarily based technique by means of competitive bidding as a choice approach for allocation of coal blocks for mining for captive consumption.
As on December 31, 2009, the Ministry of Coal has proficiently allocated 208 coal blocks, of which 84 coal blocks have been allocated to the energy sector. So far production has commenced in only 25 blocks.
Below the captive dispensation framework, a organization engaged in precise finish use, viz. energy, cement, washery, steel, and so forth. can apply for allocation of a captive coal block. Additional, acompany(ies) engaged in any of the authorized finish-makes use of can mine coal from a captive block by means of an linked coal organization formed with the sole objective of mining coal and supplying the coal on exclusive basis from the captive coal block to the finish-user organization(ies), offered the finish-user organization(ies) has at least 26% equity ownership in the linked coal organization at all instances. In addition, there can be a holding organization with two subsidiaries, i.e., (i) a organization engaged in any of the authorized finish-makes use of, and (ii) an linked coal organization formed with the sole objective of mining coal and supplying the coal on exclusive basis from the captive coal block to the finish-user organization, offered the holding organization has at least 26% equity ownership in each the finish-user organization and the linked coal organization. Hence, in view of the permitted ownership structures, investors might think about a number of collaborative selections and methods inside the suggestions.
Common Situations of Allocation
Coal blocks are commonly awarded topic to compliance with a number of situations like that:
- the allocation is produced to meet the coal requirement of the permitted finish use project, and is meant for captive use in the allocate company’s personal specified finish use projects or that of associates/finish use organization(ies) in case of a mining organization.
- coal production from the captive blocks is essential to commence inside 36 months (42 months in case the region falls beneath forest land) of the date of allocation in opencast mine and in 48 months (54 months in case the region falls beneath forest land) from the date of allocation in underground mine.
- in respect of totally explored blocks, the allocatee organization will will need to purchase the geological report from the Central Mine Arranging & Design and style Institute Restricted inside six weeks of the date of allocation.In respect of an unexplored block, the allocattee organization will will need to apply for a prospecting license inside three months of the date of situation of allotment. Exploration would will need to be completed and geological report ready inside two years from the date of situation of prospecting license.
- in respect of explored blocks, the allocatee organization would will need to submit a mining program for approval inside six months.In respect of unexplored blocks, the mining program ought to be submitted for approval inside two years and six months from the date of situation of the letter of allocation.
- The allocate organization would also have to make its personal arrangement for transportation of coal mined.
In addition to the above, the allocate organization would will need to method the Central Government/concerned State Government for vital permissions/clearances, and so forth., for attaining mining rights and associated matters (for instance, environmental clearance, forest clearance, land acquisition, and so forth.), a approach that could take amongst two to five years. Although creating a coal mine and the accompanying infrastructure is certainly a time-consuming approach, it ought to nevertheless be borne in thoughts that normative timelines for commissioning of coal blocks are far greater in India compared to international benchmarks as approvals are essential at a number of stages from numerous agencies. The Government is thinking of a slew of measures and reforms to combat this, with the objective of providing quicker approval to coal projects (like supplying option coal blocks to projects that do not get environmental clearance).
It is to be noted that the Central Government periodically monitors and critiques the improvement of allocated blocks as effectively as finish use plants by coal organizations. Wherever delays are noticed, show trigger notices for de-allocation or advisories are issued to the coal organizations cautioning them to bring the coal blocks into production as per the suggestions and milestones chart. Allocation/mining lease of the coal block might be cancelled, inter-alia, if it is determined that progress of coal mining project or implementation of specified finish makes use of is unsatisfactory, or breach of any situations of allocation.
The allocatee organization will be essential to receive a coal mining lease from the concerned State Governments beneath the Mines and Minerals (Regulation & Improvement) Act, 1957. State Governments can grant coal mining leases only with the earlier approval of the Central Government. Ahead of the approval of the Central Government is accorded, the allocatee mining organization is essential to get its mining program for the proposed coal mining region authorized from the Central Government. Coal mining leases are now granted for 20-30 years initially and can be renewed for a additional period of 20 years with the earlier approval of the Central Government. Coal mining leases are ordinarily topic to a ceiling of 10 sq. kms. of region.
India has substantial reserves of coal appropriate for thermal energy generation and metal manufacturing. Quite a few ultra mega energy plants are planned more than the subsequent 5 years, which could utilise more than 40 MMT per annum of coal. The coal sector is anticipated to develop swiftly, driven by the rising gap amongst energy provide and demand due to fast financial development. There is also a will need for investments in enhanced technologies, greater production and much better productivity at current mines, as also the will need to discover and create new coal mines. Taking into consideration the restricted reserve possible of other fossil fuel power sources and the truth that improvement of renewable power sources are nonetheless a distant purpose, coal continues to be important to India’s power requires. The Arranging Commission of India not too long ago stated that coal will stay the most viable fuel for driving sustained financial development more than the subsequent 25 years – a truth strongly reinforced by the hugely productive current public providing of CIL, the most significant IPO in India till date.