Indian Coal sector undergoes reforms

by Jan 6, 2022Governance0 comments

The Government of India has brought out significant changes over the last one year to speed up operationalization of coal mines and liberalized norms of coal auctioning.

Some noteworthy measures are :

Colliery Control (Amendment) Rules, 2021

With the objective of scrutinizing the relevance and requirement of various compliances as well as rationalizing, reducing and simplifying the related processes to enhance ease of doing business by doing away parallel compliances, Coal Mines (Conservation and Development) Act, 1974 (CMCD) and CMCD Rules, 1975 have been repealed reducing one Act from the compliance burden and Colliery Control Rules, 2004 have been amended vide Colliery Control (Amendment) Rules, 2021 which have been notified and published in the Gazette of India vide G.S.R. 546(E) dated 09.08.2021.

Mineral Concession (Amendment) Rules, 2021

Mines and Minerals (Development and Regulation) Amendment Act, 2021, carried out amendments in MMDR Act 1957. This necessitated amendment in the Mineral Concession (Amendment) Rules, 1960. Hence, MCR, 1960 have been appropriately amended vide the Mineral Concession (Amendment) Rules, 2021 which have been notified vide gazette notification G.S.R 717(E) on 01.10.2021.

With insertion of Rule 24C in the MCR, 1960, mining lease for coal or lignite is now granted to a Government company or corporation for 50 years. Mining lease granted before the MCR reforms of 01.10.2021 shall be deemed to have been granted for 50 years or till 31st March, 2030, whichever is later. State Governments are empowered to extend the mining lease for a further period of 20 years at a time for allotted mines.

With insertion of Rule 27A in the MCR, 1960, lessee of captive mine is allowed to sell coal or lignite up to such per cent (50%) of the total coal or lignite produced in a financial year after meeting the requirement of the end use plant linked with the mine. This provision is not applicable to a power project awarded on the basis of competitive bid for tariff including Ultra Mega Power Projects.

Central Government may, by notification in the Official Gazette and for the reasons to be recorded in writing, increase the said percentage of coal or lignite that may be sold by a Government company or corporation beyond 50%.

Rule 28 of MCR, 1960 has been amended providing for lapsing of leases where production and dispatch has not commenced within a period of two years from the date of execution of the mining lease or is discontinued for a continuous period of two years after commencement of production or dispatch. The mining lease shall lapse on the expiry of the period of two years from the date of execution of the lease or as the case may be, discontinuance of the production and dispatch.

Rule 64B has been amended providing that royalty shall be charged on run-of-mine coal or lignite irrespective of its processing within or outside the leased area.

Launch of Single Window Clearance

The Union government launched Single Window Clearance portal on 11.01.2021 for the coal sector to speed up the operationalization of coal mines. It is a unified platform that facilitates grant of clearances and approvals required for starting a coal mine in India.

Setting up of Coal Import Monitoring System

There is substantive time lag in DGCI&S providing import data. Consolidated import data is made available by DGCI&S after a time lag of 2 to 2½ months while disaggregated data comes only after 3 to 3½ months. This time lag in receiving data makes it deficient for taking any policy decision and reducing imports. Therefore, a Coal Import Monitoring System has been created jointly with the help of Ministry of Commerce& Industry.

“The CIMS has been effective from 01.04.2021 i.e. Bill of Entry on or after 01.04.2021 for items as listed in this Notification shall be governed by CIMS. The facility of online Registration has been made available with effect from 15.02.2021”. Till 12.04.2021, 168 registrations under CIMS portal have been successfully carried out.

Commercial Coal Mining

The auction-based regime introduced in 2014 allowed private sector participation, however, it was limited to captive usage in own end use plants. The sector has been opened up for commercial coal mining by private players in 2020 and first ever successful auction of commercial mining was launched by the Hon’ble Prime Minister on 18.06.2020 and concluded with allocation of 19 coal mines.

Commercial coal block auctions are conducted in a two-stage online bidding process, which involves technical screening and submission of competitive initial price offer in the first stage, and a second and final stage where better price offers are intended to be received.

Commercial coal mining auctions are completely different from the earlier regime of restricted sectors, use and price. Now, there are no such restrictions at all. The auctions have terms and conditions which are very liberal, allowing new companies to participate in the bidding process.

Reduced upfront amount, adjustment of upfront amount against royalty, liberal efficiency parameters to encourage flexibility to operationalize the coal mines, transparent bidding process, 100% FDI through automatic route is allowed and reasonable financial terms and revenue sharing model based on the National Coal Index.

So far, 28 coal blocks have been auctioned in the States of Chhattisgarh, Jharkhand, Madhya Pradesh, Maharashtra and Odisha (details enclosed in Annexure). The estimated benefits which would accrue to the coal bearing State Government through the successful auction of above-mentioned 28 coal blocks is as under: –

In 2nd round of auction for commercial mining, 11 coal blocks fetch single bids. Hence, it was decided by the Ministry to go for 2nd attempt of the said 11 coal mines. The last date of submission of Technical Bid was November 29, 2021. Bids received were opened on 30.11.2021. Total 7 bids were received for 4 coal blocks.

Union Minister of Coal, Mines and Parliamentary Affairs Shri Prahlad Joshi launched the fourth and latest tranche of auction of 99 coal mines including 24 new mines on 16th December 2021.

After successful auction of 28 coal mines in the first two tranches and upon receipt of 53 bids for 20 coal mines under Tranche 13 of CM(SP) Act and Tranche 3 of MMDR Act, Ministry of Coal has now launched the auction process of 24 new coal mines (9new mines under Tranche 14 of CM(SP) Act and 15 new mines under the Tranche 4 of MMDR Act). With coal mines rolling over from third round of commercial auctions and 2nd attempt of second tranche of commercial auctions, there shall be a total of 99 coal mines on offer.

Of these 99 mines on offer, 59 are fully explored mines and 40 are partially explored. These mines are spread across eight coal bearing states of Jharkhand, Chhattisgarh, Odisha, Madhya Pradesh, Maharashtra, West Bengal, Andhra Pradesh and Telangana.

The list of mines has been finalized post detailed deliberations and mines falling under protected areas, wildlife sanctuaries, critical habitats, having forest cover greater than 40%, heavily built-up area etc. have been excluded.

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