The Coal Ministry is preparing a draft on public-private partnership (PPP) in the form of mining, development and operations (MOD) agreement for exploration of coal mines by private entities in close association with Coal India Limited (CIL) to push up coal production and induct new technology through private sector participation in the XII Plan.
This is being seen as a step to ease the coal supply situation, especially in view of the failure of state-run CIL to meet the requirements of the power sector. The matter has also been discussed with the Planning Commission, which is backing the PPP model for exploration of coal mines. The MOD would stipulate that the coal mines as well as the ownership and sale of coal shall continue to rest with CIL while the selected private sector player would undertake mining operations on the basis of agreed costing to be determined through competitive bidding.
The matter had also been discussed by the former Coal Secretary, Alok Perti, with the Deputy Chairman of the Planning Commission, Montek Singh Ahluwalia.
According to a Planning Commission note, the PPP model, which has been quite successful in the infrastructure sector, should be adopted for the coal sector also. “It should be possible to expand coal mining operations rapidly through a PPP model that could enable a fair and transparent framework based on competitive bidding. In particular, two elements of a possible PPP structure would be critical.
“The first one relates to a transparent and competitive process of selection. The second one relates to a contract that would allocate risk and rewards in the most optimal manner and to the best advantage of CIL,” Dr. Ahluwalia pointed out in a letter to Coal Minister Sriprakash Jaiswal.
Further, the Planning Commission has suggested that instead of leaving the matter of PPP model to CIL, the Coal Ministry should follow the practices adopted in other PPP projects where the Administrative Ministry prepared a model concession agreement that might then be considered by an inter-Ministerial group chaired by the Coal Secretary which would include representatives of Finance and Planning and then approved by the Cabinet for adoption by CIL and its subsidiaries across regions.
“I feel that the initiative under consideration of the Coal Ministry needs to be accelerated so that we could actually refer to it in the XII Plan,” Dr. Ahluwalia has stated.