India lines up one of biggest mineral block allocations

KOLKATA (miningweekly.com) – The Indian government has firmed up plans for the auction of coal and other mineral blocks during 2017/18, billed as one of the biggest ever allocations of natural resources to private and government miners and mineral processors.

According to officials in the Coal and Mining Ministries, the series of auctions lined up over the coming year would not only offer the highest number of mineral blocks, but also qualitatively change the dynamics of India's mining sector by opening up the coal sector for miners to undertake commercial production and sell the dry fuel, without any restrictions.

An Empowered Committee on allocation of mineral resources has drawn up a paper on ‘Preparedness of states to undertake auction’, which has identified and set targets for the auction of 70 noncoal mineral blocks, like iron-ore, limestone and bauxite, across the provinces of Odisha, Jharkhand and Chhattisgarh.

The committee has been satisfied by the mandatory preparatory work on the blocks, including a minimum level of exploration, directing the provinces to commence the auction process and even file caveats before the relevant courts to avoid litigation, the officials said.

The Coal Ministry, for its part, has identified 23 blocks that will be put up for auction next year.

Among these blocks, one would be allocated to a government miner, 16 for commercial mining and the rest to sectors other than power generation companies.

The allocation of blocks for commercial mining will, for the first time since 1973, when coal mining in the country was nationalised, permit the private sector to produce and merchant-sell coal in the open market.

Since coal nationalisation, the sector was partially opened up to allow private miners to undertake coal mining only for captive consumption but merchant sale of coal in the open market was prohibited.

The 16 coal blocks to be allocated for commercial mining will be put up for auction in several tranches throughout the year, with a lot of four in the first one, a Coal Ministry official said.

However, government officials acknowledged the challenges of securing "acceptable valuations" at coal block auctions, at a time of demand slowdown and Coal India Limited (CIL) reducing production in the face of mounting stockpiles.

According to official data released last month and reported by Mining Weekly Online, CIL’s production during April to December 2016 was pegged at 377.7-million tonnes against a target of 417.5-million tonnes.

The country’s largest miner was expected to close the current fiscal with production of 575-million tonnes or at best 582-million tonnes, still lower than the 2016/17 target of 598-million tonnes.

The slowdown in demand, particularly from thermal power producers facing sagging demand for electricity from industrial sectors, was reflected in coal offtake, which during April to December was pegged at 391-million tonnes against 434-million tonnes estimated at start of the current year.