Indian Government to offer 200 Coal Blocks for Commercial Mining Purpose

In order to curb imports, the Indian government has decided to open up the Indian coal sector with an offering of 200 blocks for commercial coal mining in the next five years. The mines have a potential to produce at least 400 MnT of coal at peak capacity. In last fiscal year, India imported 235 MnT of which 125 MnT or about 54% were thermal coal imports. With opening of coal blocks for commercial purpose, the government hopes to stop coal imports for power plants by 2024.

The first tranche of coal auctions for commercial purpose is expected to begin in the ongoing financial year with 40 coal mines with peak mining capacity in the range of one to 50 MnT per annum to cater to the needs of all the consumers. The bidding rules for the commercial coal mine auctions are expected to be issued by the coal ministry by the end of this month and the consultation with the stakeholders will be held by next month.

Some of the mid-sized and large coal blocks being considered for commercial coal mining are Chendipada I and II, Madanpur North, Fatehpur and Fatehpur East, Mahanadi and Machhakata. This will be the first time after mass cancellation of coal blocks by the Supreme Court, that the mines are being auctioned outside the reverse bidding model.

According to reports, the coal ministry will auction coal blocks for commercial mining on revenue sharing basis and proposes to announce incentives for quick production. In order to incentivise early mining, the government's revenue share is proposed to be reduced by 10% if the selected bidder starts the mine a year earlier than the agreed timeline. Revenue sharing is proposed to be reduced by 20% if mining begins two years ahead of plan. While the government will not regulate prices, marketing or sale of coal from the mines, minimum production from the commercial coal mines will be specified and the bank guarantees are planned to be linked to it.

This will be the first time after mass cancellation of coal blocks by the Supreme Court, that the mines are being auctioned outside the reverse bidding model.