Captive coal mining from ET

• ·         Despite having one of the world’s largest reserves of coal, India is unable to dig it up fast enough. This results in lost production and jobs, imports of expensive coal and petroleum, depreciation of the rupee that could have been avoided, leading to higher inflation.

• ·          Coal Mines (Nationalisation) Act of 1973. It made coal mining a public sector monopoly. The law was amended in 1976 to allow captive coal mining for production of iron and steel in the private sector. The law was amended again in 1993 to allow more captive private mining, for power plants and for other notified uses. In 1996, captive mining was extended to cement plants as well.

• ·         The term "captive" infers being locked up. In the sense of a policy, it is a mandatory allocation of resources. The intent of the captive coal mining policy is to allocate a specific block to a specific need for the country.

• ·         Coal India lords over mining coal. The mining is pretty crude : dig large pits and scoop out the coal. No underground mining deploying sophisticated technology and safety measures .

• ·         This inefficient monopoly just cannot meet the domestic demand for coal. The country, in the recent past, has had to import coal to fuel power plants built right at the pithead of coal mines , far away from the coast from where coal has to be moved at high cost.

• ·         Despite sitting on nearly 100 billion tonnes of coal reserves , waiting to be mined, India today imports more than 70 million tonnes a year. These avoidable imports add to the current account deficit and the rupee’s weakness. The weaker the rupee, the more expensive all imported inputs. So, Coal India’s inability to mine coal fast enough is a contributory factor to unrelenting inflation in the country as well.

• ·         But this is not Coal India’s only crime. Indian coal is up to 45% shale and rock, noncombustible material that turns into fly ash in power plants. The sensible thing to do is to remove this non-combustible material before coal is loaded on to trains and sent across the country.

• ·         But Coal India does virtually no beneficiation of coal before it is despatched. This means that railway wagons careen around the country carrying useless shale and rock, wasting precious diesel and power in the process. Roughly 40% of the Railways’ earnings come from coal. At least 50% of the energy spent on haulage will be on coal. Since 40% of the so-called coal is shale and rock, 16% of the Railways revenues come from and 20% of its fuel cost is spent on hauling future flyash all over the place.

• ·         The most urgent reform required in coal is to scrap state monopoly, open up mining, beneficiation and trading to private enterprise and break up Coal India into half a dozen companies so as to preempt a market-distorting behemoth . 

• ·         Mining should be done by professional miners who dig up coal, pay royalty on the mined coal and pay corporate tax on profits.

• ·         Politicians in the states and at the Centre see allocation of captive mines as a prime rent-seeking opportunity. BJP-ruled Rajasthan and Chhattisgarh and Left-run West Bengal stoutly opposed a PMO proposal in 2004 to auction captive mining blocks of coal, and so, allocation was done by a screening committee as in the past, much to everyone’ satisfaction, except for the CAG’s now.

• ·         .The T L Shankar panel that first mooted auction had suggested as the bid parameter  how much coal can be mined  — not how much money the miner would pay upfront. As regards undue benefit to companies, the real question is, is there any due benefit in captive mining at all? And captive mining is a fallout of state monopoly in coal. Scrap state monopoly: that is the starting point for cleaning up coal.

Guidelines followed for Identification of Coal Blocks for Captive Allocation

The guidelines adopted for demarcating the blocks are such that the developers would face a number of problems in quickly bringing the allotted blocks to the production stage. Ministry of Coal relies on Coal India Ltd (CIL) and Singareni Collieries Company Ltd (SCCL), for identifying the captive coal blocks. The guidelines adopted by CIL & SCCL for identifying and allotting coal blocks for captive mining are as follows:

•  The blocks offered to private sector should be at reasonable distance from existing mines and projects of CIL in order to avoid operational problems

•  Preferably, blocks in greenfield areas having less or no development of basic infrastructure like road, rail link, etc. may be allotted to the public/private sector for captive mining. The areas where CIL has already invested in creating such infrastructure for opening new mines should not be handed over to the private sector, except on reimbursement of costs

•  Blocks already identified for development by CIL where adequate funding is on hand or in sight should not be offered to the private sector

•  Public/private sector should be asked to bear the full cost of exploration in these blocks which may be offered

•  For identifying blocks, the requirement of coal for about 30 years would be considered

•  Others, which include Mine Plan approval under the provisions of Mines and Mineral (Development and Regulation) Act 1957, approval of the Directorate general of Mine Safety, and inspection by Coal Controller for an appropriate enforcement of conservation measures under the provisions of the Coal Mines (Conservation and Development) Act 1974.