Ease of Doing Business in Coal Sector, Govt Signs MoU with Major PSUs

Coal India Ltd, Ministry of Coal will sign MoUs with major PSUs such as BHEL, IOCL and GAIL(India) Ltd on Coal Gasification Projects.

The Union Government has introduced various reforms in partnership with States to increase the Ease of Doing Business in the Coal sector.

Coal Allocation Reforms

1. 2014- On 24 September 2014, the Supreme Court cancelled nearly all the coal blocks the central government had allocated between 1993 and 2010. After cancellation of 204 coal blocks by the SC, first set of reforms were introduced in 2015. In these reforms, allocation of coal blocks started and commercial sale was not allowed.

2. 2020: The second set of reforms were carried out in 2020 by amending the laws, introduction of a liberalized regime of commercial mining with no restriction on sale/utilization of coal. These reforms allowed the captive users to sell 50% of production in open market after meeting the captive requirement.

3. Recently, a policy was issued which allows one time relaxation to surrender coal blocks by PSUs without appropriation of Bank Guarantee.
Ministry of Coal has adopted revolving auction of coal blocks where Coal blocks are offered for auction on regular basis.

Price Fixing Decision

Earlier, coal blocks were allocated on the basis of fixed price policy and now through auction it is on ad-valorem, determined by the market. It was discussed that Ministry of Coal has considered the interest of States while drafting the reforms.

Important Note: National Coal Index captures the movement of price from both domestic and international market.

It was mentioned that support from States is needed to harness the maximum benefits of these reforms.

Executing Authority: Centre or State

• Ministry of coal finalises the commercial agreements and it is the State's responsibility to look after the operationalization aspects.
• The revenue from commercial auctions also goes to the concerned States. It was discussed that concerned states are free to frame Land Compensation policy and the Centre may follow state's policy if it is useful. States may advise the respective Directorates of Mines and Geology to look after the coal sector also as in the near future, since number of commercial mines is going to increase further.

Next- generation Reforms for Coal

In the conference there was also an overview of next-generation reforms that are proposed by Ministry of coal. Among these reforms, these are the important ones:

• Sale of coal through market determined pricing mechanism
• Coal Gasification
• Just Energy Transition.

For coal gasification, several steps have been taken by the Ministry of coal to promote coal gasification which also include incentives such as 50% rebate in auction bid price, long term linkage from CIL has been allowed and a PLI (Production Linked Incentive) scheme is being drafted to support coal gasification by both public and private entities.

Important Note: What is coal gasification? Coal gasification is a process in which coal is partially oxidised with air, oxygen, steam or carbon dioxide to form a fuel gas.

Sustainable Mining

The stakeholders were also informed about the country's target to cut the emissions to Net Zero target by 2070. It might pressurize the coal sector not only to adopt more sustainable mining practices but also be ready for the upcoming transition.
It was added that the Coal India Ltd (CILs) plantation area got doubled in last three years. Further, it was also delegated to lignite rich States that high-capacity lignite-based power plants may be established.

Goals for Domestic Coal Production

• The all India coal production in 2021-2022 was 778.19 MT while in 2020-2021 it was 716.083 MT.
• In the current financial year (up to June'22), the country has produced 204.876 MT of coal as compared to 156.11 MT during the same period of last year with a growth of about 31%.

Government Efforts Towards Reducing Importing Coal and Increasing Domestic Coal Production

1. Timely Monitoring: A Monitoring Committee has been constituted under the Chairmanship of Secretary (Coal) with Chief Secretaries from respective Concerned States, Coal Controller Organization (CCO), Secretary (MoEF&CC) & CMPDIL as members of the Committee to conduct regular reviews.
2. Enactment of Mines and Minerals (Development and Regulation) Amendment Act, 2021: This Act provides that captive mines owners (other than atomic minerals) may sell up to 50% of their annual mineral (including coal) production in the open market after meeting the requirement of the end use plant linked with the mine in such manner as may be prescribed by the Central Government and on payment of such additional amount. This step will stimulate the coal block allocattees to commence coal production early.
3. Commercial Coal Mining Scheme: Auction of commercial mining on revenue sharing mechanism was launched in 2020. Till date, auction process of 46 coal blocks have been done.
4. Early Commencement of Coal Production: Under commercial mining scheme, Rebate of 50% on Final Offer would be allowed for the quantity of coal produced earlier than Scheduled Date of Production.
5. Incentives: Ministry has granted incentives on Coal Gasification or Liquefaction (Rebate of 50% on Final Offer.
6. Auction of abandoned mines in CIL: CIL has offered 20 discontinued coal mines for re-opening on revenue sharing basis.

About Coal India Limited

Coal India Limited is the largest supplier of coal in the country. Coal India Limited (CIL) contributing more than 80% of the indigenous production/supply has envisaged a plan to enhance its production to reach the level of 1 BT (Billion Tonne) coal by the year 2024-25 to meet the demand of coal indigenously and to eliminate non-essential import of coal.