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Unleashing coal: Mines go under the hammer from today; key takeaways from auction

PM Narendra Modi launched the process for auction of 41 coal mines for commercial mining via video conference on Thursday

Unleashing coal: Mines go under the hammer from today; key takeaways from auction
New Delhi, First Published Jun 18, 2020, 3:27 PM IST
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New Delhi: In a big reform initiative aimed at attracting global investment in the mining sector, the government on Thursday started auction of coal mines for commercial extraction by the private sector.

In all, 41 mines with a total geological coal reserve of 17 billion tonne is on offer under the first phase of commercial coal mine auctions. These include both large and small mines with peak rated capacities (PRC) ranging from 0.5 to 40 million tonne per annum (mtpa) of coal. The cumulative PRC of all mines is 225 mtpa.

The mines on offer are largely fully explored ones meaning that it could be brought to production immediately. Moreover, 4 coal mines are in offer that could provide input to the steel sector. The mines are in five states of Chhattisgarh, Jharkhand, Madhya Pradesh, Maharashtra and Odisha.

The commercial coal mining auctions are completely different from earlier regimes of restricted sectors, use and price. Now there are no such restrictions at all.

Launching the auction of mines for commercial mining, that is expected to garner Rs 33,000 crore of capital investment in the country over next five to seven years, the Prime Minister said India will win the coronavirus war and turn this crisis into an opportunity, and the pandemic will make India self-reliant.

The launch of the auction process not only marks the beginning of unlocking the country’s coal sector from the lockdown of decades but aims at making India the largest exporter of coal, the Prime Minister said.

Accordingly, there are no financial and technical criteria for bidders while floor price of coal mines has been set competitively at 4% of revenue share. Plus, investors would have liberal exit option that could be exercised post lock-in period by just informing the nominated authority. For partially explored mines, investors could exit post completion of the mandatory work programme.

The successful bidders also will have flexibility in coal production unlike in the past and have provision for incentives for early production and coal gasification. The winners could have 65% of scheduled production on an annual basis and 75% of scheduled production over a block of 3 years.

There will also be complete freedom to use coal production for sale, captive consumption, sale to affiliates, coal gasification and exports. Moreover, exploitation rights for CBM and other minor minerals present in the coalfields would also be provided to miners.

Also, security creation through mortgage over the coal mine has been allowed for scaling any financing needs. Change in control has also been allowed.

The coal mines auction process will lay a strong foundation for energy security in the country by producing additional coal providing large scale employment and huge opportunities for investment in the coal sector. These efforts will supplement the 1 billion tonne coal production likely from Coal India in FY 23-24 and meet the full requirement of domestic thermal coal.

(With inputs from agencies)

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