Auction system will motivate new players to develop the blocks more speedily.
The broad consensus evolved at a Centre-State meeting on August 10, on the issue of introducing an auction system for allocating coal blocks, is likely to smoothen the passage of the amendment of the Mines and Minerals (Development and Regulations) (MMDR) Act, 1957, which is needed for bringing forth this system.
At the New Delhi meeting, the State governments underscored the importance of attractive and fair resettlement and rehabilitation packages for the project-affected families so that the process of land acquisition could be completed smoothly.
The States were also keen that the private sector coming through this route should make firm commitments on corporate social responsibility at the time of bidding itself. There was divergence of opinion on the issue of reserving the coal-bearing areas only for mining. The State governments felt that there were multiple demands on land for alternative uses and the priority would have to be determined having regard to local conditions and circumstances.
A very recent case that exemplifies this issue is the spat between the Bengal Aerotropolis Project and Coal India. The Rs. 10,000-crore airport-city project would block substantial coal reserves, a study done by the Central Mine Planning and Development Institute (CMPDI) has revealed.
Under the Coal Mines (Nationalisation) Act, 1973, coal mining was mostly reserved for the public sector. However, through subsequent amendments, and following the liberalisation measures since 1991, captive mining for some specified end-uses was permitted.
Thus, at present, a company engaged in producing iron and steel, generating power, producing cement, coal gasification and coal liquefaction can carry on coal mining for captive consumption.
While state-owned entities too could carry on mining, the earlier restrictions imposed were removed through a liberal policy framework in 2001, which put state public sector enterprises on a par with Coal India. However, despite all these measures, coal-raising through these initiatives did not really come about.
A total of 229 blocks now under the production plan of CIL, or Singareni Coalfields Company (the joint venture between the Andhra Pradesh Government and Singareni Collieries) were identified and the mining dispensation was based on merits of individual cases through inter-ministerial and inter-governmental consultations.
Till May 2009, the Ministry has allocated 201 blocks with geological reserves of about 45 billion tonnes of coal to government and private sector companies for both captive and commercial mining. Of these, 97 blocks have been given to government companies with coal reserves of 27 billion tonnes while the private sector got 104 blocks with reserves of 18 billion tonnes.
However, so far, only 25 blocks have come into production with the progress in respect of the state PSUs being even less encouraging. The Parliamentary Committee felt that if coal blocks already allotted were not being developed as per the time-frame set by the Coal Ministry, then their allocation should automatically stand de-allocated and such coal blocks might be disposed of through the new policy initiative now being contemplated.
Arguing in favour of the auction route, the Planning Commission said that when they get the coal through auction, new players would have a more direct stake in premium they would have to pay by way of bid amount and this in turn would motivate them to develop the blocks more speedily.
The increased economic activity would also boost the states which could help by giving faster clearances according to existing rules.