SCALE UP CAPTIVE MINING TO AUGMENT DOMESTIC COAL PRODUCTION: CII

 

The Confederation of Indian Industry has recommended that scaling up captive mining by allocating greater number of blocks for captive use by designated end-users  and addressing the constraints faced by the developers in commencing work on the  allotted blocks can go long way in augmenting domestic coal production. Coal is the largest source of electricity production in India and is likely to be the main fuel for power generation in the foreseeable future. Therefore augmenting the supply is vital to ensure that power capacity addition plans are not derailed due to inadequate internal coal production.

 

To bridge the increasing demand-supply gap, CII believes that it is necessary to expeditiously identify coal blocks outside of PSU’s immediate development plans and offer them to captive producers to augment coal production in the near future.

 

The experience of the companies involved in captive mining portrays that uneconomical and ‘difficult to work’ blocks are allocated to captive producers which restricts domestic production. CII is of the view that increasing the production through captive mining would require that the exploration data is brought in public domain and the allocation made to serious developers through a transparent process. Therefore towards building transparency, CII strongly recommends that an independent regulator must be appointed at the earliest. The regulator could undertake both upstream allocation of captive coal blocks and monitor the development and production phases so that coal producers become accountable.

 

CII also believes there is also an immediate need to introduce streamlined, documented and time-bound procedures to speed up forest and environmental clearances and set reasonable time limits for various approvals, including mine leases.   

 

According to CII, the regulatory intervention in near term is essential to mimic the market which is imperfect at the current juncture and there is a critical need to create a level-playing field where multiple producers irrespective of their size and scale can co-exist. Another concurrent measure, to provide impetus to the captive coal mining, will be to introduce the concept followed in Ultra Mega Power Projects where requisites inputs and clearances are put in place before the private developer takes over through a competitive selection process.

 

The Coal Sector is dominated by Public Sector Undertakings namely Coal India Ltd. together with its subsidiaries and Singareni Collieries Co. Ltd.  Therefore increasing the number of players in the coal sector and opening up coal-bearing areas yet to be explored are other important measures that CII believes must be adopted to ensure that supply is able to keep pace with the demand and reliance on imports is reduced.

 

Besides these interim measures, the main objective, in CII view, is to amend the existing laws to allow private and foreign companies to mine, produce, and freely market coal. The Mines & Minerals (Development & Regulation) Act 1957 needs to be amended to introduce competitive bidding for coal blocks. In the interim, a points system allowing merit-based allocation to developers with proven track record should be followed under the watchful eye of an independent regulator till the time the legislation is amended. 

 

“Coal production, modernization and efficiency improvement would depend on the level of competition in the industry. Encouraging private participation and FDI in the coal sector is instrumental”, said Mr. Chandrajit Banerjee, Director General of CII.

 

 

New Delhi

7^th August 2009

 

Neelam Joshi

Media Desk

Confederation of Indian Industry

23, Institutional Area

Lodi Road

New Delhi – 110 003

Mobile: 9810882431

 

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