India Eases Rules and Throws Open Coal Mining to all Companies
By Ajoy K Das
January 10, 2020 - India’s Coal Ministry this week amended eligibility rules which in effect will enable any company – foreign and even non-coal dependent – to participate in coal block auctions and commercial mining in the country.
Until now, the rules had permitted only power, metals and mining companies to enter commercial coal mining without end-use restrictions and participate in the proposed auction of coal blocks.
Under the new rules, even existing captive coal block operators will have the freedom to engage in merchant sale of coal that is surplus to its own requirement.
“Previously, there was a restriction that anyone participating in auction should have coal mine operation in India. That has been removed. Now anybody can participate in coal auction,” Coal Minister Pralhad Joshi said, announcing the amended rules.
Coal Secretary, A K Jain said, “Companies which are not engaged in any coal use industry can also participate in the auction. They can mine and produce coal for their own consumption or sell it in the market and the new rules offer entire flexibility of operations.”
Under the new dispensation any foreign company can bid for coal blocks and undertake mining projects through wholly owned subsidiaries as 100% foreign direct investment (FDI) has been enabled in coal mining, subject only to the stipulation that such a wholly owned subsidiary should be registered in India.
The Coal Ministry is targeting the completion of auction of at least 40 coal blocks before the end of current financial year on March 31.
However, in a subsequent tranche of coal block allocation, the government would put up unexplored blocks for bidding as against only explored blocks until now. Officials said that in the case of unexplored blocks, the Coal Ministry would offer prospecting licence-cum-mining licence (PL-ML) as was prevalent in the case of auction of unexplored oil and natural gas assets allocated through competitive bidding to domestic and foreign investors.
By offering PL-ML, the government would be able to sharply increase the number of blocks that it could put up for auction and in the longer term increase the number of sellers of coal in the domestic market, till now the exclusive domain of government mining companies.
For the record, in 2014, the Supreme Court had cancelled all coal blocks allocated over the previous 20 years maintaining illegalities in the process of allocation of these assets and ruling that auction be made mandatory for the allocation of all mineral resources. In the wake of this ruling, the government in 2015 held its first auction of coal blocks, putting up 34 assets for bidding but restricted to captive mining by metal and power companies for their own use.