The Union Cabinet on Tuesday approved a policy to give coal-mining licences to private companies through competitive bidding. The new auction-based system, a first in India, will replace the earlier controversial policy of allotting coal blocks based on the recommendations of a bureaucrats’ panel.
The government has been under relentless attack from the Opposition after India’s national auditor Comptroller and Auditor General (CAG) in a report last year suggested that the arbitrary allocation of coalfields may have robbed the exchequer of potential revenues of Rs. 1.86 lakh crore between 2004 and 2011.
The Central Bureau of Investigation (CBI) is probing allegations of irregularities in the previous coal block allocations to power and steel companies in a Supreme Court-monitored probe.
“This (auction policy) is a historic decision by the government. The move will go a long way in ushering transparency in coal block allocations,” said Sriprakash Jaiswal, minister of coal.
The new rules are aimed at making allocations more transparent and keeping non-serious players out of the fray as many companies that were given coalfields earlier haven't yet started mining operations.
Under the new rules, successful bidders will have to disclose a work schedule, make payments linked to the volume of coal dug out from the mines besides shelling out an upfront fee roughly equivalent to the 10% of the estimated value of the coalfield.
The first set of four mines with an estimated 2,000 tonnes of coal are expected to go up for auction within the next two months
The successful bidders will get two years for exploration and five year for developing the mines. The coal blocks will come bundled with preliminary environment and forest approvals before they are auctioned.
More than half of India’s power is produced from coal. State-owned Coal India Limited (CIL), accounts for nearly 80% of the country’s coal output, but it isn’t enough to meet India’s rising energy demand.