Slew of incentives likely for underground coal mining

Open market sale to be allowed, revenue-sharing for abandoned mines/

coa;. coal mine
The first round of the auction of abandoned mines has been completed and about 10 mines have already been allocated. (IE)

By Manish Gupta

In an effort to promote environment-friendly underground coal mining, which still accounts for less than 5% of the country’s total coal output, the government is considering a slew of proposals including keeping fuel produced from underground mines away from the notified price regime.

Private players are also being incentivised to revive abandoned coal mines of Coal India on a revenue sharing model with land given on a long term lease, with the condition that underground mining technology will be employed by them.

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“The entire coal produced from underground mines will be put to auction, so that it gives higher premium for the investors,” an official, with knowledge of the matter said. Not only state-run Coal India (CIL), but private coal miners will also be given the incentive.

“Certain abandoned coal mines of CIL have been put on the revenue-share model. The developer does not have to incur initial capex on them as the land is there and the mine is partially developed. The miners can start production with huge savings on capex and time,” he said.

Considering the advantages of underground mines for their better grade of coal and lesser impact on environment, the government aims to reduce the share of opencast mining, currently more than 90%, as these require a lot of land and cutting of forests.

The first round of the auction of abandoned mines has been completed and about 10 mines have already been allocated. Coal India will get coal on revenue sharing basis and it can sell the coal through auction in the open market and not in the notified segment.

The CIL has lined up another set of 10 abandoned mines for offer. With minimum entry and financial barriers, this initiative will help increase the coal output, the official said. Extractable reserves in these mines is around 380 million tonne.

Further, the government has constituted a committee to promote manufacturing of heavy earth moving machineries under the ‘Make in India’ campaign to fulfil the vision of ‘Atmanirbhar Bharat’. The committee submitted its report last week.

The mining ministry is also in consultation with various stakeholders to ease out the environmental clearances norms, which has been one of the key challenges.

The government aims to minimize the import of thermal coal, of which there is a large reserve in India but needs to be extracted and made available. India is the second largest producer, consumer and importer of coal in the world after China.

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The ministry has set a coal production target of one billion tonnes in FY24 and 1.31 billion tonnes in FY25. Coal minister Pralhad Joshi recently said that the country would have surplus domestic supplies and would start exporting coal by FY26.

“Technological intensity and mechanisation is much more in underground coal mining. It is more suited for big players like Rio Tinto and BHP. Despite 100% FDI allowed in coal mining, none of the big players took part in the auctions probably due to the regulatory landscape and the law and order issues. Best way forward can be JVs between technology providers and local partners for managing local issues,” Ritabrata Ghosh, vice president and sector head at ICRA Ltd said. Currently, most underground coal mines in India are not profitable, he added.

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First published on: 01-05-2023 at 02:00 IST