New Delhi | April 2, 2017:

The government is planning to allow the commercial mining of coal to attract global giants such as Glencore, BHP Billiton and Rio Tinto. The plan is to put out 30 million tonnes of reserves in the first phase of bidding with no end-use restriction for companies.

More than four decades after coal mining was nationalised, the country will offer pricing freedom and revenue sharing contracts to investors securing coal blocks through the reverse auction route.

The coal ministry has floated a discussion paper detailing the key aspects of the planned auction process - under the provisions of the Coal Mines (Special Provisions) Act of 2015 - and has invited comments from stakeholders.

"While Coal India Ltd has set itself a target of doubling its production within five years to one billion tonne, given the present demand-supply situation and the projected economic growth of the country, it will be necessary to further augment production through commercial mining," the discussion paper on the auction of coal mines for commercial mining said.

The ministry has called a stakeholders' meeting on the discussion paper on April 10.

"Commercial mining of coal is a forward-looking step that will lead to monetising of a natural resource and have the potential of boosting technology-aided private investments in coal sector while enhancing the market access of coal for the downstream industrial segments of power, steel and cement," Ficci president Pankaj R. Patel said.

It has also proposed that commercial miners should have full flexibility to decide the pricing and sale strategy.

The ministry has proposed a revenue-sharing model for companies that make "windfall gains" in the case of a significantly-superior business cycle.

"While the successful bidder shall be free to decide its marketing and pricing strategy, the revenue sharing will be calculated on the basis of actual revenue or actual production multiplied by 1.2 times the CIL run-of-the-mine (ROM) price for the average grade of coal for the specific time, whichever is higher," the paper said.

The mines earmarked for commercial mining will be large enough to attract the interests of foreign players in mining, the draft consultation paper said.

Experienced coal miners, with net worth of more than Rs 1,500 crore, will be eligible to participate in the auctions.

The successful bidder will pay an upfront payment equivalent to 10 per cent of the annual turnover value of coal in three instalments - 50 per cent on execution of the mining agreement, 25 per cent on the execution of the mining licence and remaining 25 per cent upon the grant of mine opening permission.

According to the Coal Mines Special Provision Act of 2015, the government can open up commercial mining for private players. The government had earlier allowed state utilities to mine coal and sell to private companies. The move, which has been on the anvil for quite some time, would help the government to reach its target of producing 1.5 billion tonnes by 2022.

(Source: https://www.telegraphindia.com/)