Change in law needed to allow private players sell coal in open market, say officials.
The Ministry of Coal aims to issue the Notice Inviting Tender (NIT) documents before the end of the current financial year to begin the process of commercial coal mining auctions.
In a bid to boost production, the Centre decided to allow private companies to mine coal for commercial use in February 2018. The Centre had also planned to begin auctioning coal mines with no end use restrictions by December 2019. But according to officials in the know, a change in law needs to be effected to allow private players sell coal in the open market. After this, coal can be commercially mined and sold in the country by all entities.
“This change would require an approval of the Union Cabinet, followed by an Ordinance or a Bill depending on the urgency and subject to the House being in session,” a top Coal Ministry official said.
The earlier timeline to begin offering blocks for 100 per cent commercial coal mining was December 2019.
The bidding of coal mines for commercial purposes was also delayed as issues such as base price for the auctioning of mines is yet to be finalised. Till now, coal mines were auctioned with a pre-specified end-use for the coal to be mined. These auctions are based on the price per tonne of coal that the bidders would offer to States.
The base price for auctions was defined based on the Coal India notified price for the particular grade of coal that dominates the geology of the mine on offer.
But industry watchers say that the Coal India notified price builds in the inefficiencies in production that the public sector undertaking is criticised for.
After an inadequate response in bid rounds for end-use linked mining, the Centre decided to offer an added incentive and the winners have been allowed to sell up to 25 per cent of the total coal produced in the open market. For mines being auctioned till now, it is still mandatory to use at least 75 per cent of the total coal production for the specified end-use.