The ordinance on the coal sector, which was signed by President Pranab Mukherjee on Tuesday , allows factories or power stations fueled by cancelled coal blocks to be put up for auction if the owners so desire. Further, the ordinance has provisions amending two existing laws governing the mining sector to allow private firms to sell coal in the open market in the future.
After the Supreme Court cancelled the allocation of coal blocks in August, some firms demanded the auction of stranded end-use plants so they could repay debt. The government has accepted this and included the option in the Coal Mines (Special Provisions) Ordinance, officials said.
During their interactions with government officials, promoters of some steel firms had said it was economically unviable to run plants without attached mines.Some had also Rs.295 per tonne claimed the penalty imposed by the Supreme Court was high for most private miners who were given difficult and non-lucrative blocks. “The end-use plants and the coal projects are married to each other and cannot be separated. If separated, the cost dynamics go haywire. We had asked the government to auction both projects and compensate us in a way that we are able to repay the bank loans,“ said a developer, who did not wish to be identified.
The ordinance will have converted into legislation in the winter session of Parliament, likely to start from November 24. The official said the coal ministry has had extensive interactions with the law ministry to bring amendments to two legislations governing coal mining in the country -the Coal Mines (Nationalisation) Act of 1973 and the Mines and Minerals (Development & Regulation) Amendment Act of 1957.
The amendment to the two Acts to allow private mining and sale is expected to increase competition, infuse new technology and lead to a market-based price discovery at a time the country faces severe coal crunch. India imported about 146 million tonnes of coal for Rs.92,538 crore during 2012-13 and about 169 million tonnes at a cost of Rs.95,175 crore during 2013-14.` The cost of imports would have been much higher had there not been a slide in coal prices in the international markets in the past two years.
“An enabling provision allowing the government to frame rules in future auction of mines for self-consumptionsale has been provided.This will stop black-marketing of coal. With this ordinance, stalled power and steel projects will restart, unlocking bank capital and lead to reduction in NPAs,“ the coal ministry tweeted on Tuesday.
The Union Cabinet had on Monday approved an ordinance enabling it to open the coal sector when required and allot 204 captive coal blocks cancelled by the SC to private companies through online auction and on a nomination basis to state-owned companies.
The official said about 74 coal blocks are likely to be awarded to government companies and bid out to various sectors in the pilot round of auction that will be kicked off by December.
The ordinance also provides for setting up an official liquidator to value land, machinery and end-use plants of coal block companies. The value will enable the government to price the blocks for auction.
It will also revive a dormant post, called the commissioner of payments, to collect the additional levy of Rs 295 per tonne of coal mined from the captive blocks. Successful bidders for coal blocks will compensate the previous companies for the land, machinery and end-use plants.
An ordinance is passed by the President to deal with emergency situations when Parliament is not in session. It is valid for six months and as per rules, the government is required to table a supplementary Bill in the next Parliament session justifying the ordinance and follow the regular process for creating a legislation. The Coal Mines Nationalisation Act of 1973 bars commercial mining by private companies while the Mines and Minerals Amendment Act allows auction of mines but only for captive use by steel, power and cement companies.
The government has withdrawn an earlier Bill pending in the Rajya Sabha since 2000 seeking amendment to the Coal Mines (Nationalisation) Act.The proposal faced stiff opposition from trade unions and Left parties. State-run monopoly Coal India is unable to meet the demand for coal in the country .The company blames delayed environment and forest clearances for the slow growth in production.