Coal block auctions, which have fetched about Rs 40,000 crore to Madhya Pradesh so far, will help the state bridge its fiscal deficit in the coming years, experts said.
Six mines in MP have been auctioned in the first two rounds while three more mines has been earmarked by the coal ministry for auction in the next phase.
The full amount will be received over the long-term lease period until the extractable reserves are exhausted.
However, the money will start flowing in as soon as the coal mines bill is passed in Rajya Sabha as six out of the nine mines which have been auctioned are already operational.
The companies will also have to pay annual royalty to the state government. The funds are expected to boost the state's economy which has been under strain with the government's market borrowing exceeding Rs 6,000 crore this fiscal.
"Madhya Pradesh has the fifth largest coal reserves in the country at 19,232 million tonnes. The payment and royalty from coal mining will help the state bridge its fiscal deficit and help uplift the state's economy in the long-term," economist Jayantilal Bhandari said.
The state budget has estimated a fiscal deficit of Rs 16,745 crore for 2015-16.
"The state government will also be able to tie up with private companies for commercial mining and sale of coal for end use in different sectors. This will bring in additional business and revenue to the state," Bhandari said.
In the next round of bidding, the coal ministry plans to initiate auction of Schedule-III mines — essentially those mines that are not producing but are ready for operations. The remaining mines will be auctioned only in the next fiscal.
"Our estimate is that we will be getting three to four times more than what we used to get until now, so financially we will be in much better condition," a senior official of state finance department told HT.
The coal ministry had initially listed 22 mines for auction in Madhya Pradesh, but the environment ministry raised objection to auction of the Mahan coal block as it is located in dense forest region.