Private miners can soon sell coal directly to users

* Innovative PPPs planned to mitigate supply crunch

Written by Surabhi | New Delhi | Published:March 6, 2013 12:41 am

Private sector coal miners could soon be able to sell the mineral to industry directly with the public sector Coal India (CIL) only raising the bills for the transactions.

This innovative model of public-private-partnership for the sector could be a game changer for the endemic shortage of coal in the economy despite the country having the world’s third largest reserves.

The long-term plan,on the drawing boards of the coal and the finance ministries is a follow through of the announcement made in Budget 2013-14.

“Suppose Coal India has contracted to sell coal to a particular power plant. The company now has to collect it from the mines to one place and sell it from there. Instead we can move to a situation where it does not do the transaction,only the billing”,said secretary,economic affairs Arvind Mayaram in a conversation with The Indian Express.

The plan will ensure that the money from the sale will come only to CIL as envisaged by the Coal (Nationalisation) Act. But the sales will be several times faster than what happens now.

Private miners holding long-term contracts for the mines will then have the incentive to mine more coal efficiently removing the production shortage that is crippling the economy.

Coal production in the current fiscal has grown only 5.7 per cent after dipping by 2.7 per cent in 2010-11. Production has also been hit because of the ongoing controversy over the allotment of mines that has led the government to rescind 29 of them from the developers.

Currently huge delays in transportation of coal from the CIL often run into years. In the proposed PPP,private miners and their buyers can collect the coal directly among themselves and bill it through the CIL portal.

“We de-bottleneck the transaction between supply and demand. The miners and the end users act on behalf of CIL. This PPP is not meant to circumvent the Coal (Nationalisation) Act but work within it to extract efficiencies”,Mayaram said.

The plan will build on the current model that CIL uses with mine development operators or MDOs. But these are short term contracts with very little requirements in terms of performance standards and the level of technology involved.

The PPP model will instead expand the concept of the operators into a longer term contract of 30 to 35 years,depending on the capacity of the mine being bid out.

It will include performance standards,determination of minimum norms for coal production and penalties of a certain order as well as factor in the risks.

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