The Ministry of Coal, Government of India, has launched the ninth round of commercial coal mine auctions on December 20, 2023, offering up to 26 blocks to bidders. This is the latest in a series of auctions that aim to make India self-reliant in the energy sector and create employment opportunities for millions of people.
Background
The auction-based regime for coal mining was introduced in 2014, allowing private sector participation, but it was limited to captive usage in own end use plants. In 2020, the sector was opened up for commercial coal mining by private players, with no restrictions on the sale or utilization of coal. The auctions have terms and conditions that are very liberal, allowing new companies to participate in the bidding process, reduced upfront amount, adjustment of upfront amount against royalty, liberal efficiency parameters to encourage flexibility to operationalize the coal mines, transparent bidding process, 100% FDI through automatic route and reasonable financial terms and revenue sharing model based on the National Coal Index.
Achievements
So far, five rounds of auctions of coal and lignite mines have been conducted successfully, auctioning 64 coal mines. The operationalization of these coal mines is expected to lead to a capital investment of around ₹34,486 crores and generate employment opportunities for approximately 3,10,818 people. The sixth round of auctions, launched on November 3, 2022, received a huge response from bidders, with 141 mines on offer. Of these, 133 are offered under the sixth tranche and eight are offered under the second attempt of the fifth tranche. Of the 133 mines offered under the sixth tranche, 29 mines are under the Coal Mines (Special Provisions) Act, which were earlier deallocated by the Supreme Court, and 104 mines are under the Mines and Minerals (Development and Regulation) Act. It is expected that these auctions will result in a capital investment of approximately ₹11,250 crores and employment generation for 1,00,000 people.
Prospects
The ninth round of auction comes just a month after the launch of the eighth round with a total of 35 mines on offer. Among the mines to be offered in the ninth round, seven are fully explored and 19 are partially explored. Five coal mines will be offered under the second attempt of round seven of commercial coal. Of these, four are fully explored and one is partially explored. The fresh round of auction is expected to attract more bidders and investors, as the government has simplified the bidding process and reduced the entry barriers. The government has also announced several incentives and reforms for the coal sector, such as allowing captive coal block owners to sell 50% of their production in open market, rationalizing coal linkages and developing coal gasification projects.
The government has set a coal production target of 1.4 billion tonnes for 2026-27 and 1.58 billion tonnes for 2029-30. The focus of the ministry is on opening new mines, expanding mine capacity and production from captive and commercial mines. All these three operational components are contributing and have clear plans for further enhancement. In FY23, the domestic coal production increased by 14.8% to 893.19 million tonnes from 778.2 million tonnes in FY22. In the current financial year, till November, coal production is about 591.40 million tonnes as compared to 524.7 million tonnes during the same period of last year. As a result of the increase in domestic production, the coal import has declined by 5% during April to September in the current financial year.
The auction of commercial coal mines is expected to make India self-reliant in the energy sector and create more than 2.8 lakh jobs from 91 coal mines.