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Unleashing Coal: 41 mines on offer for Commercial extraction

New Delhi: In a big reform initiative aimed at attracting global investment in the mining sector, the government on Thursday started the auction of coal mines for commercial extraction by the private sector.

In all 41 mines with total geological coal reserve of 17 billion tonnes 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 tonnes 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 coming coal mines are in an offer that could provide input to the steel sector. The mines are located in five states of Chhattisgarh, Jharkhand, Madhya Pradesh, Maharashtra, and Odisha.

Commercial coal mining auctions are completely different from the earlier regime of restricted sectors, use, and price. Now there are no such restrictions at all.

The proposed auctions have terms and conditions which are very liberal allowing new companies to participate in the bidding process, reduced upfront amount, adjustment of upfront amount against royalty, liberal efficiency parameters to encourage flexibility to operationalize the coal mines, transparent bidding process, 100 percent FDI through automatic route allowed and reasonable financial terms and revenue sharing model based on National Coal Index.

Accordingly, there are no financial and technical criteria for bidders while the floor price of coal mines has been set competitively at 4 percent of revenue share. Plus, investors would have a 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 mandatory work programs.

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

There will also be complete freedom to numbers 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 01 billion tonne coal production likely from Coal India in FY23-24 and meet the full requirement of domestic thermal coal.

 

SOURCE–IANS