Opening up coal sector: Govt begins with CIL

With a decision pending on amending the Coal Nationalisation Act to open up the coal sector to private sector investments, the Centre has initiated the process of loosening Coal India Ltd’s virtual monopoly of supplying coal to domestic consumers.

With a decision pending on amending the Coal Nationalisation Act to open up the coal sector to private sector investments, the Centre has initiated the process of loosening Coal India Ltd’s (CIL) virtual monopoly of supplying coal to domestic consumers. The Centre is allowing a slew of state government-owned companies to not only undertake coal mining in 19 blocks but also allow them to sell to non-captive consumers.

These 19 coal blocks have the potential to produce 7,476 million tonnes of coal and assuming even 50 per cent of these reserves are extractable, the total amount of coal that can be produced amounts to three to four billion tonnes. Out of the 289 coal blocks with CIL, the public sector company produces around 360 million tonnes of coal annually. Most of this produce goes towards power stations and steel companies.

The coal ministry is expected to allot these 19 blocks to the state government-owned companies this week and has been made under the existing statutes which allows the ministry to allocate blocks under “government company dispensation”.

This move comes after Prime Minister Manmohan Singh himself put the issue of opening up the coal sector, through amendments to the Coal Nationalisation Act, on the backburner. At the Energy Coordination Committee meet held on March 27, when the issue of possible amendments to the Coal Nationalisation Act was discussed, he said ‘‘there is no political consensus as yet in favour of making amendments to the Coal Nationalisation Bill’’ and even asked for a political consensus to be built on the matter.

An official said after these 19 blocks, which are termed ‘‘non-CIL’’ blocks, the ministry would de-reserve 40-45 coal blocks that come under CIL. The thinking behind this move, according to sources, is to ‘‘expand the coal production base beyond CIL’s jurisdiction’’ and also meet the huge demand for coal being posed by the power sector, steel and cement companies.

There are nine state government mining and mineral development corporations that would be allotted these 19 blocks. While most of these would go towards new and existing power projects, these companies would be free to sell coal to other consumers as well (non-captive). Apart from these, state electricity boards and state-owned power corporations would be given these blocks to mine either for their own use (captive purposes) or sell to other consumers, sources said.

The 19 blocks are spread over five states — Jharkhand, Chattisgarh, West Bengal, Maharashtra and Madhya Pradesh — and most of them fall under two states Jharkhand and Chattisgarh.

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Of these blocks, one block (Mara II-Mahan) in Madhya Pradesh has been allocated towards both the Delhi government and Haryana Power Development Corporation. This block would be used to supply coal for a 5000 mw power plant being planned for Delhi for the forthcoming Commonwealth Games.