Cabinet approves new methodology for auction of coal mines

The Cabinet Committee on Economic Affairs, chaired by Prime Minister Shri Narendra Modi on 20 February 2018,  approved the methodology for auction of coal mines / blocks for sale of coal under the Coal Mines (Special Provisions) Act, 2015 and the Mines and Minerals (Development and Regulation) Act, 1957.

What is the new methodology?

  • Under the new methodology the coal sector has been opened to commercial mining by private entities. In this way monopoly of Coal India has ended.
  • According to the government, the opening up of commercial coal mining for private sector is the most ambitious coal sector reform since the nationalisation of this sector in 1973.
  • The methodology gives highest priority to transparency, ease of doing business and ensures that natural resources are used for national development.
  •  The coal blocks will be allocated by “ascending forward auction” in which the winner will be determined by the price per tonne of coal offered to the state government where the mine is located. 
  • There shall be no restriction on the sale and/or utilization of coal from the coal mine.

Effects

  • This reform is expected to bring efficiency into the coal sector by moving from an era of monopoly to competition.
  • It will increase competitiveness and allow the use of best possible technology into the sector.
  • The higher investment will create direct and indirect employment in coal bearing areas especially in mining sector and will have an impact on economic development of these regions.
  • It will also lead to energy security as 70% of India’s electricity is generated from thermal power plants.
  • This reform will ensure assured coal supply, accountable allocation of coal and affordable coal leading to affordable power prices for consumers.
  • As the entire revenue from the auction of coal mines for sale of coal would accrue to the coal bearing States, this methodology shall incentivise them with increased revenues which can be utilised for the growth and development of backward areas and their inhabitants including tribals. States in Eastern part of the country will be especially benefited.

Background

  • The Supreme Court of India vide its order dated 24.09.2014 cancelled 204 coal mines/blocks allocated to the various Government and Private Companies since 1993 under the provisions of Coal Mines (Nationalisation) Act, 1973.
  • To bring transparency and accountability, the Coal Mines (Special Provisions) Bill 2015 was passed by the Parliament which was notified as an Act on 30.03.2015.
  • Enabling provisions have been made in the Coal Mines (Special Provisions) Act, 2015 for allocation of coal mines by way of auction and allotment for the sale of coal.



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