– Anjali Chambiyal, Policy Research Team, Prastaav

-Parth Raj Parasar, Founder, Prastaav

1.1 Introduction

Coal in India was 1st mined in 1774 when Englishmen John Sumner and Suetonius Grant Heatly of the East India Company commenced commercial exploitation in the Raniganj Coalfield along the Western bank of Damodar River.Coal mining and extraction of coal deposits from the surface of Earth and from underground is the most abundant fossil fuel on Earth. It was the basic energy source that fueled the Industrial Revolution of the 18th and 19th centuries,Since the mid-20th century, coal has yielded its place to petroleum and natural gas as the principal energy supplier of the world.The Indira Gandhi administration nationalized coal mining in phases – coking coal mines in 1971–72 and non-coking coal mines in 1973. All coal mines in India were nationalized by 1 May 1973. This policy was reversed by the Narendra Modi administration four decades later. In March 2015, the government permitted private companies to mine coal for use in their own steel, power or aluminum plants. The move broke the monopoly over commercial mining that state-owned Coal India has enjoyed since nationalization in 1973.

Recently, the central government has stated that it will auction 41 coal mines to boost private sector investments in coal, as part of the Centre’s Rs 20 Lakh Crore special economic package. The process is open for domestic as well as global firms under the 100% foreign direct investment route. Cabinet Minister Pralhad Joshi twitted on 15th June, 2020 with pointers in regard to privatization of coal mining in India. Under the ease of doing business scheme, the liberalization of mining was proposed under following heads,

  • Introducing revenue sharing model for coal auction rather than Rs./tone.
  •  Creation of National Coal Index (NCI) for setting market driven prices.
  • Easy exit policy for partially exported blocks.
  • No endues restriction for participating in coal mine auctions.
  • Free trade of coal as exporter can use, sell or export coal without restrictions.
  • Removal of prior experience of eligibility criteria for auctions.
  • NCI will be based on imported prices, auction price and CIL notified price.

1.2 Coal India Limited (CIL)

CIL is an Indian state-owned coal mining and refinery company headquartered in Kolkata, West Bengal, India. It is the largest coal-producing company in the world and a MAHARATNA PSU. The company contributes to around 82% of the coal production in India.

Remaining 18%= Captive consumer

 Above this coal mafia and local coal smugglers are major stakeholders which impact the smooth and legalities of coal mining in India.

1.3 How has the Coal Sector in India Evolved over the Years?

India’s coal industry was predominantly driven by the private sector in the early years after Independence.

Indira Gandhi government in 1973 transferred all coal holdings to public sector company “Coal India Ltd” through the Coal Mines [NATIONALISATION] Act.

  • The key reason cited for nationalizing was that it was essential to meet the growing need for coal to feed the critical power sector
  • Private players have been allocated some “captive coal mines” to cater to fixed specific end use domains such as the steel sector.

1.4 What are the Steps Taken towards Privatizing Coal?

  • The Initiatives- enabling provisions for commercial mining & sale of coal were already included in the coal mines [special provisions] act of 2015.
  • Cabinet committee on economic affairs [CCEA] has now allowed their implementation by approving the methodology for auctioning rights.
  • The government holds that the move will boost energy security, make coal affordable & enable more job creation.
  • It remains to be seen if the government will open up valuable coal blocks for bidding or merely the lesser profitable ones of coal India.

The Concerns

  • For genuinely generating private interests, a considerable chunk of the valuable mines needs to be opened up.
  • It is also important to ensure the integrity of the auction process & the checks needs to be placed to dissuade unviable bids.
  • These are highly critical to ensure that a reliable & continuous coal supply is ensured for the power sector.

1.5 What are the other recent developments in the coal sector?

  • In 2014, Supreme Court cancelled the allocation of 204 coal mines to various parties as irregularities were discovered by the CAG.
  • An ordinance was brought in quickly & a transparent auction process was evolved for the affected mines.
  • The intention was to ensure that there are no supply shocks for power producers on account of abrupt disruptions in mining operations.

1.6 Global Share of Recoverable Coal Reserves

Though India is the 5th largest resource bank in the world, India imported 235 million tons of coal last year.Of this, 135 million tones could have been substituted with domestic reserves. The total cost of that is Rs 1.71 Lakh Crore.

1.7 Policy Reforms- Introduction of Commercial Mining in Coal

Coal Vision 2030 published by CIL in 2017 and latest notification on privatization are few latest references in regard to policies for coal mining in India. Some of the important heads for the same included,

  • Increase in production as well as competition: Leverage higher rate of producing mines to enable more efficient and productive world-scale operations.
  • Revisit grade pricing of coal and mechanism from grades, based on the coal mined to coal desired for end use.
  • Mining facilitated with off-take routes for bulk transportation: as because railway projects are delayed for long periods of time it is imperative to look at alternatives.
  • Policies related to Risk Management.
  • Renewables and storage likely to emerge as key substitutes. (Section 2.1)
  • Regulatory environment to continue to get stricter, increasing the compliance cost. (Section 2.4)
  • No new coal mines need to be allocated/ auctioned beyond the current pipeline (Section 5.3) and Captive coal blocks may be underutilized due to issues of end consumer sectors. (Section 5.6), etc.

1.8 Legal Aspects and Statutory Provisions Related to Sector

Need to reduce import of substitutable coal & increase Self-reliance in coal production. The government will introduce competition, transparency & private sector participation in the coal sector through:

  • Revenue sharing mechanism instead of regime of fixed rupee/ton.
  • Now, any sector can bid for a coal block & sell in the open market.
  • Entry forms will be liberalized.
  • No eligibility conditions, only upfront payment with a ceiling.
  • Against earlier provision of auction of fully explored coal blocks now even partially explored blocks to be auctioned.
  • Will allow private sector participation in exploration.
  • Coal gasification/liquefaction will be incentivized through rebate in revenue share will result in significantly lower environmental impact.
  • Will assist India in switching to a gas-based economy.
  • Infrastructure development of Rs 50,000 crores for evacuation of enhanced CIL’s target of 1 billion tons coal production by 2023-24 plus coal production from private blocks.
  • Includes Rs 18,000 Cr worth of investment in mechanized transfer of coal [conveyor belts] from mines to railway sidings.
  • This measure will also help reduce environmental impact.
  • Coal liquefaction is a process of converting coal into liquid hydrocarbons.
  • Coal bed methane [CBM] extraction rights to be auctioned from Coal India Limited’s [CIL] coal mines.
  • Ease of doing business measures, such as mining plan simplification, will be taken.
  • Mining plan has been shortened, made amenable for loading online.
  • To allow for automatic 40% increase in annual production.
  • 100% FDI in coal mining through automatic route.
  • Monopoly of coal India likely to end will help create an efficient energy market.
  • Earlier, 100% FDI under the automatic route was allowed for coal mining for captive consumption by power projects, iron, steel & cement units.

Section 11A of the Mines & Minerals [development & regulation] Act provides that. The central government can auction coal & lignite mining licenses only to companies engaged in-

  • Iron & steel Power & coal washing sectors.
  • The cabinet has approved promulgation of Mineral Laws [amendment] Ordinance, 2020.

It will amend-

  • The Coal Mines [Special Provisions] Act, 2015.
  • The Mines & Minerals [Development &Regulation]Act,1957 [iron ore mining lease will expire in March].

1.9 Impact of the Ordinance

  • It allows coal mining for any company present in sectors other than steel & power.
  • It dispenses away with the captive end-use criteria.
  • The end-use restriction had led to “comparatively less” participation in the coal block auction, out of 204 coal block allocations that has been cancelled by the supreme court in 2014, only around 29 had been auctioned.
  • Previously, there was a restriction that anybody who has to participate should have the coal mine operation in India.
  • This condition has now been removed.
  • Thus, companies that do not have coal mine operations in India can also participate in coal block auctions.

Benefits

  • Create an efficient energy market.
  • Usher in competition.
  • Reduce coal imports.

1.10 Demands of the Workers of Public Sector Companies after the Privatization

The central unions are demanding:

  • Withdrawal of decision on commercial mining in coal industry.
  • Stop all steps towards weakening or privatization of CIL and SCCL.
  • Withdrawal of decision to de-link Central Mine Planning & Design Institute Limited (CMPDIL) from CIL.
  • Enforce recommended pay benefits and provide wage increases to contract workers in CIL.
  • Enforce implementation of various issues related to workers welfare and protecting the interests of the CIL, as agreed in the company’s apex tripartite body, joint consultative committee meeting held on 22 May.
Source: https://scroll.in/article/870328/new-commercial-mining-policy-wont-end-coal-indias-monopoly-but-might-make-it-more-competitive

According BMS, the trade union will protest against five major issues impacting workers. These include the problems of unorganized sector workers particularly migrant workers, non-payment of wages, huge job losses, suspension of labour laws and increasing working hours in many states and unbridled privatization by selling PSU’s corporatization of defence and railway production units.

2.0 Government launched the maiden auction after it allowed private players to bid for coal blocks

  • Privatization kicks in with auction of 41 coal assets.
  • The mines that are going under the hammer are located in Madhya Pradesh (11), Chhattisgarh (9), Jharkhand (9), Odisha (9) and Maharashtra (3).
  • The government launched the maiden auction after it allowed private players to bid for coal blocks, without any end-use restrictions. This would also be the first set of coal assets to be auctioned off through the new market-determined revenue share model that replaced the fixed fee/ton regime that turned off private investors. Also, seven of these assets are unexplored ones, and the investors will enjoy certainty of tenure from the prospecting to the production stages.

2.1 Mines auction: Centre to change 5 coal blocks in Chhattisgarh with 3 other mines in state.

  •  The Centre has accepted the suggestion of the Chhattisgarh government to change five mines in the state put up for commercial coal auctions with three other new mines.
  • It will also create around 60,000 additional jobs.
  • Chhattisgarh will be the key beneficiary of this biggest and boldest reform ever taken in coal sector. Commercial mining will unlock unprecedented opportunities to transform the coal sector by ushering in additional capital investments, latest mining technologies, employment generation, orderly development and ultimately leading to self-reliance of the country in coal requirement.

2.2 Bander coal mine in Maharashtra withdrawn from auction.

  • The coal ministry has withdrawn Bander mine in Chandrapur district of Maharashtra from the list of 41 coal blocks put up for auction for commercial mining as the mine lies in the eco sensitive zone of TadobaAndhari Tiger Reserve.
  • Pralhad Joshi, Union minister for coal and mines, said the ministry has accepted the proposal of the Chhattisgarh government to exclude five coal blocks in HasdeoArand, one of country’s most pristine forest areas, and other bio-diversity-rich areas from commercial mining, but has also acceded to include three new ones in a bid to reduce the country’s coal import bill.

2.3 Coal mines action in Jharkhand and 100 year issues in Dhanbad District.

Recently, the Supreme Court of India issued a notification to centre regarding plans to auction coal mines in Jharkhand. Further, a strong descent came from the state government. “The Jharkhand government said Centre’s action is in violation of the environmental norms and will cause ‘irreparable damage’ to the forests and land.”Jharia (near Dhanbad) is famous for a coal field fire that has been burning underground for about a century. The first fire was detected in 1916 and hence then according to records, the KhasJharia mines, which was a pioneer of coalmines in India, one of the firsts to collapse in underground fire in 1930. Two of its collieries, KhasJharia and Golden Jharia, which worked on maximum 260-foot-deep shafts, collapsed due to now infamous underground fires, on 8 November 1930, causing 18 feet subsidence and caused widespread destruction to both human and environment. In 1972, more than 70 mine fires were reported in this region. As of 2007, more than 400,000 people of Jharia are living on land in danger due to these underground coal fires. Satya Pratap Singh in this regard states that, “Jharia Township is on the brink of an ecological and human disaster”. As a side effect, people around this area are facing serious health issues including, skin and lung diseases.

SUGESSIONS ON THE POLICY FRONT

Though Coal India Limited published a report in 2017 to analyze the long term trends that would play a role in determining the future for coal in the country, Coal Vision 2030 did address some of the issues on policy front, but gave a less emphasis on policies related to reasonable and limited use of mining, sustainable development, issues pertaining to illegal mining and impact on environment. Based on the pertaining problems, and as per our research, we suggest following points to improvise the balance between privatization, coal mining and sustainable development.

Source: http://emilyindelhi.blogspot.com/2012/07/jharkhands-illegal-coal.html
  • Full (100%) privatization of coal mines to private and with foreign players as stake holders, government may lose monopoly over mining once it is auctioned. Thus the policy should be balanced in such a way that government has upper hand over the stake holders in case of breach of trust or while determining the sovereignty of mining that is auctioned.
  • Environment Impact Assessment should be applied prospectively to any type of mining in India. Policy should be proactively formulated and implemented to make up for the vanished natural forest, soil degradation, air pollution, etc.
  • Though the policy is well analyzed by experts, removing eligibility criteria in mining action can have an adverse result. Companies with no experience may cause adverse impact to both human, mines as well as natural resources. Thus clause of eligibility should surely be there in scientific sectors like mining.
  • Legal loopholes should be narrowed down to reduce the percentage of captivated mining and strict criminal proceedings should be initiated against coal mafias.
  •  Displacement and proper rehabilitation of human due to mining should be the responsibility of the private players; government should monitor the same proactively.
  • Mining should be stopped with immediate effect in areas around 25 Km radius of the protected area forest networks.
  • Steps should be taken to control the coal burning situation in Dhanbad district in Jharkhand and come up with solution in regard to dangers pertaining to underground burning of coals.

CONCLUSION

Therefore, as the inception during the Mughal Era, mining in India has played an important role in the development of the country, amounting to a notable section of GDP. Privatization of mining has its own merits and demerits. On one hand, where it generates a systematic and much efficient logistics and operation, it may experience a rise in rates as private players will come into play. For the same, policies in the form of statues need to be balanced in such a way that the nation is benefited at most. Further, we will have to strengthen the legal lacunas that act as feeble in illegal trade and extraction of coal. We will also have to access the Impact on Environment, as well as the approvals should mandate Environment Impact Assessment prospectively.

FEATURED IMAGE SOURCE: thehindubusinessline.com/economy/streamline-approval-developmentprocess-of-coal-mines-pwc-india/article7681438.ece

References:

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  14. Mishra, Law Kumar (31 August 2006). “Jharia to be shifted”. The Times of India. Retrieved 24 January 2019
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  18. Anurag Sehgal and Rahul Tongia, Recommendations for reforms in India’s coal mining space, (February, 2018), available at:https://www.brookings.edu/research/recommendations-for-reforms-in-coal-mining-space/
  19. Bander coal mine in Maharashtra withdrawn from auction, available at:https://m.rediff.com/money/report/bander-coal-mine-in-maharashtra-withdrawn-from-auction/20200723.htm.
  20. https://www.trek.today/displayimage.php?album=17&pid=671899.

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