Coal ministry launches biggest ever coal mine auction of 141 mines

Representative image (AFP)

Union Finance Minister Nirmala Sitharaman on November 3 launched India’s biggest ever coal mine auction comprising 141 mines in as many as 11 states with a cumulative peak rate capacity (PRC) of 305 million ton (MT).

Sitharaman, however, urged investors to also focus on coal gasification simultaneously as the Government of India is set to release a Rs 6,000 crore production linked incentive (PLI) scheme. Coal gasification is a process in which coal is partially oxidised with air, oxygen, steam or carbon dioxide to form a fuel gas (syngas). It is a cleaner option than burning coal.

As per the coal ministry, of the 141 mines that were put up for auction in the sixth round of commercial auctions, 71 are new coal mines, 62 were rollovers from the previous tranches, and eight were a second attempt of the fifth round of commercial auctions as they had earlier received single bids.

“After nationalisation of 1970s, we have moved from the times when only public sector units produced coal. Unfortunately, Coal India couldn't ramp up capacities as per need which led to coal imports. Even while importing, little thought was given to better the country’s domestic coal production. But, I must mention here that during the UPA-II government the CAGR (cumulative annual growth rate) of coal imports from the year 2010-19 was 23 percent. Only with interventions at the policy level, the CAGR of coal imports has been brought down to 2 percent from 2015-19. Coal import by the power sector has reduced by 41 percent - from 45.48 MT 2020-21 to 26.99 MT in 2021-22,” Sitharaman said.

The first ever tranche of commercial coal mine auctions in India was launched in June, 2020 by Prime Minister Narendra Modi with an aim to increase domestic coal production to a level that India is able to export the fossil fuel. Back then India started with auctioning 41 coal mines. More than two years later, India still imports about 200 MT of coal, while exports are almost nil.

Union Coal Minister Pralhad Joshi said that since June 2020 till November 2, the government has auctioned 64 coal mines having a PRC of 152 MT and that a few of them will start operations from this year itself. He, however, did not cite the number of captive coal mines that would be commissioned this year. These 64 mines are expected to bring investments of Rs 22,862 crore and has generated direct or indirect employment to about 200,000 individuals, he said.

Joshi also announced that in the current fiscal year, India’s coal dispatch would hit 900 MT for the first time. “Last year (2021-22) we have produced more than 89 million ton from captive coal blocks which is also a first in India. All put together, total domestic coal production in 2014 was 572 MT. This year, we have achieved 817 MT of coal and I am very sure we will hit 900 MT in the current year combining all forms of domestic coal - commercial, captive, abandoned and Coal India,” he said.

The states where the 141 coal mines under the sixth tranche were auctioned include Jharkhand, Chhattisgarh, Odisha, Madhya Pradesh, Maharashtra, West Bengal, Andhra Pradesh, Telangana, Rajasthan, Tamil Nadu and Bihar. The maximum blocks are in Madhya Pradesh (30), Chattisgarh (28) and Odisha (27).

Additional Secretary (coal) M. Nagaraju said the ministry learnt from its past mistakes and relaxed a number of norms for the auction this time. "Mines falling under protected areas, wildlife sanctuaries, critical habitats, having forest cover greater than 40 percent, heavily built-up area etc. have been excluded. The block boundaries of some of the coal mines where there was presence of dense habitation, high green cover or critical infrastructure etc. have been modified based on comments received during stakeholder consultations to enhance bidders’ interest and participation in these coal blocks,” he said.

Some of the key features of the auction process include reduction in upfront amount and bid security amount, permission to relinquish part of the coal mine in case of partially explored coal mines, introduction of National Coal Index and National Lignite Index, ease of participation with no entry barriers, full flexibility in coal utilisation, optimized payment structures, incentives for early production, coal gasification and usage of clean coal technologies.

The commencement of sale of tender document has started from November 3. Details of the mines, auction terms, timelines etc. can be accessed on MSTC auction platform. The auction will be held online through a transparent two-stage process, on the basis of Percentage Revenue Share. SBI Capital Markets Limited, the sole Transaction Advisor to Ministry of Coal for the commercial coal mine auctions, had devised the methodology and is assisting the Ministry of Coal in conducting the auction process.

Joshi reiterated that the finance ministry has sanctioned Rs 250 crore for coal exploration and added that the coal ministry will soon go for tender for the Rs 6,000 crore PLI scheme on coal gasification.