Government miners to initiate commercial coal mining in India

KOLKATA (miningweekly.com) – India’s attempts to launch commercial coal mining would be initiated by government-owned mining companies, breaking the near monopoly of behemoth Coal India Limited (CIL).

The federal Coal Ministry had identified 12 coal blocks that would be allocated to a number of mining companies owned and operated by provincial and federal governments, with freedom for merchant coal sales to various consumers without any end-use restrictions.

According to a Ministry official, the federal government, through its Geological Survey of India, had completed preliminary explorations of the 12 coal blocks, while it would be incumbent on the various mining companies to undertake detailed exploration, post allocation of the blocks.

He said that for the first time since the nationalisation of coal mining in 1973, a miner other than one owned and operated by India’s central government would be entitled to undertake and supply coal to users on a commercial basis.

However, the government was silent on opening up commercial coal mining to private companies, which were currently only permitted captive mining for own consumption.

Simultaneously, the government was considering the option of earmarking at least a few of the 12 coal blocks for specific supplies to companies in small- and medium-scale sectors. However, coal supplies to the latter would only be on commercial basis.

This was in response to a large number of coal user industries, such as small- and medium-scale sponge iron producers, claiming that they did not have the wherewithal to compete with large industries in securing coal supply linkages through competitive bids, as had been made mandatory by the government, scrapping discretionary supply agreements with CIL.

The official said that the blocks would be allocated to various government miners on a ‘nomination basis’ and that the process would be completed within the next two to three months.

However, a section of the sponge iron producers pointed out that despite allocating coal blocks for commercial mining, there was no clarity yet on the pricing to be adopted by these miners for supplies made to small- and medium-scale industries.

Coal supplied by CIL had a dual pricing strategy; one at a notified price to thermal power plants and the other at a price discovered through bidding for coal supply linkages.

The government had not enunciated any pricing formula for the new commercial miners and clearly price based on bids for supplies had been ruled out, as specific blocks would be earmarked for small- and medium-scale consumers to free the latter from competitive bids for supply linkages.

It is worth pointing out that CIL did not get into direct supply arrangements with small user industries and instead these industries were catered to by small coal traders.