India to offer coal blocks to private investors for alternative fuel production projects

KOLKATA (miningweekly.com) – To open up a larger window for commercial mining of coal by private investors, having recently decided to permit such private operators in the coal mining sector, the Indian government has started identifying additional coal blocks to be auctioned for exclusive extraction of alternative fuel.

According to a Coal Ministry official, the new coal blocks will be identified over the next two months and auctioned during the current financial year for projects, including coal-to-gas, coal-to-liquid (CTL) and coal-to-polychemicals.

He said that the coal blocks likely to go on auction include those that have difficult seams and are a challenge for conventional mining, but which are more amenable to the extraction of alternative fuels.

A technical committee under the Ministry has been appointed to identify these blocks.

The new coal blocks will be put up for auction under the Mines, Minerals Development and Regulation Act.

However, legislation may have to be amended to permit private miners to extract alternative fuels without having to make commitments toward producing coal, as currently mandated under rules for commercial coal mining, the official said.

Mining Weekly Online earlier reported that the Indian government amended the legislative environment to permit commercial coal mining by private investors for first time in the country since 1973, without any restriction on sale and pricing of the produce.

In the first tranche, an aggregate reserve of 30-million tons will be offered to private miners through the auction route.

However, the official pointed that government’s priorities were clear on value-added mining projects and alternative fuel production from coal, adding that opening up this sector for private investors would be an additional incentive at a time when there was surplus production and low domestic demand for coal.

Significantly, responding to the changed environment of surplus coal and imminent competition from private miners, following opening up of the sector, government behemoth Coal India Limited (CIL) has already announced a slew of diversified projects based on coal.

These included production of petroleum oil from a Chatra coal block in the eastern province of Jharkhand and a methanol plant, at Dankuni, for which CIL has invited technology suppliers.

Coal Ministry officials have pointed out that all projects for production of value-added products based on coal would require collaborations, joint venture partners and technology suppliers for private miners, but that the onus would be on the Indian government to readily offer coal blocks for all such prospective investors.

However, the officials acknowledged the challenges to securing technology for production of coal-based chemicals and alternative fuels as most such technology was “proprietary and held by a few global companies”.

For example, some years ago, CIL and Sasol, from South Africa, negotiated over a CTL project worth $1.5-billion, but no deal could be concluded owing to differences on terms and conditions.

Subsequently, about five years ago, private conglomerate Tata Group and Sasol had held talks on a $10-billion CTL project, but no progress was reported on a deal.