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Saturday, 20 Jun 2020
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Coal Sector Reform: PM launches auction of coal mines for commercial mining

 
Coal Mining
 
India witnessed a major reform in the Coal Mining sector which will boost other sectors such as Power, Steel, Aluminium, Fertilisers and Cement. On 18 June 2020, Prime Minister Narendra Modi launched the auction process of 41 coal blocks for commercial mining. The move is a part of series of announcements made by the government of India, under the Aatmanirbhar Bharat Abhiyan (Self-Reliant India). It will help India towards becoming self-reliant in the Energy sector. 
 
The Coal Ministry in association with FICCI launched the process for auction of these coal mines. A two-stage electronic auction process is being adopted for allocation of coal mines. 
 
With the launch of commercial mining for coals, any sector can buy coal as per their requirements. Other sectors such as Steel, Aluminium, Fertilisers and Cement will benefit as well. It will also help in increasing power generation.
 
A total of 41 coal mines are put on offer which include fully explored and partially explored mines. These include four coking coal mines which are fully explored mines. The auctions of these coal mines are available in varied sizes. This includes 31 coal reserves of up to 500 million tonne, four reserves between 501 to 1,000 million tonne, three reserves with a capacity of 1,001 to 1,500 million tonne and another three coal reserves ranging from 1,501 to 2,000 million tonne. 
 
The government has put on offer various grades and types of coal including coking and non-coking types of coal. There are 37 coal blocks of non-coking, two coal blocks of coking and another two blocks of both coking and non-coking. 
 
The auction also gives opportunity to bidders to opt for underground or opencast coal mines as per their choice and mining capabilities. Of the 41 coal mines, 26 are opencast, seven underground and eight of both opencast and underground. Moreover, these include 34 explored, four partly explored and three regionally explored coal blocks.
 
These coal blocks are located in the states of Madhya Pradesh (11 blocks), Chhattisgarh, Jharkhand & Odisha (each nine blocks) and Maharashtra (three blocks). The coal bearing states will get Rs 20,000 crore of additional revenue.
 
The auction process will be a two-stage tender process with technical and financial bidding. A total of 16,979 million tonne of reserve of coal blocks has been put on offer. The cumulative peak rated capacity of these blocks is 225 million tonne. 
 
India has the world’s fourth largest coal reserve and is the second largest producer. However, it is also the second largest coal importer. The decision to fully open the Coal and Mining sector will see increased competition, capital, participation and technology. Also, due care has been taken to ensure that new players in the private mining sector do not face the problem of finance.
 
The Coal sector reforms will make Eastern and Central India pillars of development. The 16 aspirational districts in the country have a huge stock of coal. An amount of Rs 50,000 crore will be spent on creating infrastructure for coal extraction and transportation. 
 
The move will help meet the country’s energy needs, reduce dependence on imports, and modernise the sector. It will also create employment opportunities for 2.8 lakh people. The extra revenue generated through coal production will be used for public welfare schemes in the region. 
 
The states will also continue to get help from the District Mineral Fund, from which a major chunk will be utilised in development of essential facilities in the surrounding areas. 
 
Moreover, latest technology can be introduced to make gas from coal, and the environment will be protected with steps like coal gasification. Coal gas will be used in transport and cooking while urea and steel will promote manufacturing industries. The government has set a target to gasify around 100 million tonne coal by year 2030 and four projects have also been identified for this purpose. For this, around Rs 20,000 crore will be invested. 
 
The auctioning of the coal blocks for commercial mining will contribute to around 15 percent of India’s projected total coal production in 2025-26. It will generate around Rs 33,000 crore in capital investment over next five to seven years. The 100 percent FDI will also bring international practices, latest technology and mechanisation in mining operation.
 
The laws and auction methodology for commercial mining have been framed with thorough stakeholder involvement. Also, the blocks to be offered have been identified through public consultation. 
 
As per data collated by Projects Today, currently there are 337 coal mining projects entailing an investment of Rs 2,41,652 crore across various states. Of these, 220 projects worth Rs 1,32,140 crore are under Central government and 46 projects worth Rs 92,876 crore are taken up by the state governments. Of the total projects, 54 are under execution with an aggregate investment worth Rs 34,192crore. 
 
Most of these projects are in the states of Jharkhand, Chhattisgarh, Odisha, Madhya Pradesh and Telangana. In fact, Jharkhand has the highest number of coal mining projects – 94 projects entailing an investment of Rs 1,17,931 crore. 
 
One of the mega coal mining projects currently under execution is Dumri open cast coal mining project in Jharkhand with a capacity of one million tpa undertaken by Hindalco Industries. The cost of the project is worth Rs 9,809 crore.
 
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