Captive Coal Mining by Private Power Developers - Issues and Road Ahead: IDFC
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Captive Coal Mining by Private Power Developers – Issues and Road Ahead:
Summary of recommendations
Ministry of Coal has allocated captive mines to bulk users of coal, in public and private
sectors. However, very few of the coal blocks have started production. Summarized
below are the recommendations which may be taken up by the Central Government, State
Government and Developers to facilitate the rapid development of coal blocks:
1. Guidelines followed for Identification of Coal Blocks for Captive Allocation
Central Government: With reference to identification of coal blocks for allocation, the
following should be considered:
Coal India Ltd (CIL)/ Singareni Collieries Company Ltd (SCCL), currently, identify
blocks for allocation to private sector which are at a distance from the existing blocks
of CIL/SCCL. This practice should be modified and blocks which are in the vicinity
of CIL/SCCL and which are not included in the expansion plans of CIL/SCCL,
should also be included in the list of captive blocks for allocation;
In identifying captive coal blocks at ‘reasonable’ distance from existing mines and
projects of CIL/SCCL, it should be considered that the distance should not be at a
disadvantage to the captive coal block developer in terms of available infrastructure
and other facilities;
Without disturbing the present procedure of coal block allotment, the future allotment
of coal blocks should be on the basis of better investigation and for which CMPDIL
and other agencies should be mobilized
State Government: The State Government and its agencies should facilitate development
of infrastructure in the mining areas, particularly in providing right of way, railway
clearances, water, electricity, etc.
Developers: The captive block developers should coordinate with other coal block
developers in proximity to jointly fund the development of Infrastructure based on a
Master Plan prepared by an independent agency.
2. Allocation of Coal block
Central Government: The Ministry of Coal should not only look into the promoter
background and the end-use, but should also give adequate weightage to the technical &
financial capability of the applicants for timely development of the blocks. Further,
auctioning approach may be adopted for allocation of coal blocks. However, auctioning
of the block to the highest bidder may not be economically viable and adversely affect
the ultimate consumer. Thus, the following approaches, depending on the level of
information available for the coal blocks, may be adopted in taking the auctioning route
for allocation of blocks:
Production sharing formula for fully unexplored blocks ;
Maximum estimated production for partially explored blocks; &
Lowest cost of power generated from coal from fully explored captive blocks with
adequate information on the mineable coal reserves.
13. Approvals and Clearances
Central Government
Central Government should bring about the legal changes to have a single window
approach through a nodal agency at the State Level under the department of mines,
which would have representation from all the concerned departments in the State
Government. The nodal agency can pre-determine the conditions for each category of
land based on environmental sensitivity and nature of the proposed activity
(prospecting, mining etc.). The nodal agency may complete the requirements of
identification of land for compensatory afforestation, enumeration of trees, cost-
benefit analysis, etc. before inviting application for mining lease.
Public-Private Partnership model can be adopted in the form of a shell company
formed for each of the captive blocks allocated. Shell companies (formed by the
Public sector) are bid out to the private sector only after obtaining clearances and land
acquisition is completed.
MoEF should segregate coal bearing areas into ‘Go’ and ‘No-Go’ areas for each type
of lease (Reconnaisance, Prospecting, and Mining) on the basis of the forest cover
and environmental & ecological sensitivity. For areas defined as ‘Go’, it may be
prudent to allow minimal or no forest & environmental clearances for investigative or
prospecting purposes, with the conditionality that cutting of trees without prior
permission is not allowed. Non-coal bearing areas can be used for rehabilitation
colonies and townships.
A concurrence by Forest Advisory Committee or the empowered committee is
required for obtaining forest clearance. The committee then sends a report to the
Hon’ble Supreme Court before sanction is accorded. This procedure needs to be
reviewed to reduce delays in awarding clearances.
MoEF clearances for projects which have a greater probability of commencing
operations before the Eleventh Plan should be given priority.
The Ministry of Coal as well as MoEF should grant consent to the developer of a coal
block to develop the block in 2-3 phases, so that production could start early.
State Government: State Government should adopt procedures to issue the prospecting
license within a minimum time.
4. Land Acquisition
State Government: The procedure for land acquisition needs to be made less time
consuming as the State Governments in large number of cases own significant portion of
the land.
5. Rehabilitation of Project Affected People (PAP)
Central Government: It is recommended that the Ministry of Coal coordinate with the
State Governments to align the State R&R Policies with the National R&R Policy.
2Further, the State Governments should facilitate the developers in negotiating the
compensation package with the PAP’s.
State Government: For general development and improvement in the coalfield areas, the
State Government could consider creating an “Area Development Fund” by applying a
levy on each tonne of coal produced. This fund could be utilized for social welfare of
PAP including their health & education, improvement of infrastructure, roads, water
supply etc.
6. Geological Investigations & Mining plan – alternate agencies
Central Government: New agencies with the competence to perform geological
investigations need to be set up and accredited by the Government of India. These
agencies should be independent and unaffiliated to Coal India Limited or other public
sector coal companies. These agencies or an independent expert group should also be
empowered to review and approve the mining plan, which would be an input to Ministry
of Coal.
7. Tapering coal linkage/ marketing of surplus coal
Central Government: The timeframe for development of coal block is likely to be much
longer than a power plant. Ministry of Coal, therefore, has decided to provide coal
linkage on a tapering basis to the power producers who have been allotted captive coal
blocks and whose mining plan has been approved. It is suggested that the Ministry of
Coal should provide for the condition that the mining lease should be approved before the
power plant commences operations.
8. Joint Allotment of Coal Blocks
Central Government: In case of joint allotment of coal blocks it has been observed that
some of the companies in the Joint Venture do not furnish the Bank Guarantee, which
hinders the development of the block. Companies in the consortium which furnish the
Bank Guarantee should be allowed to proceed with development of the coal block, and
the partners who fail to provide the bank guarantee should be replaced with other
companies from among the applicants whose applications are pending with the Ministry.
3Captive Coal Mining by Private Power Developers – Issues and Road Ahead
The rapid growth in the Indian economy has led to a robust growth in the demand for
power. The demand for power has been constantly outpacing supply. With a view to
reducing the demand-supply gap, large generation capacity additions have been planned.
Notwithstanding efforts to have a diversified portfolio of fuel options in power
generation, share of coal based generation has increased over the years and with large
capacity additions envisaged over next decade, coal will continue to remain the primary
source of fuel for power generation. Besides substantial coal based capacity additions,
increase in demand for coal has been accentuated by improved utilization of plants,
diminishing quality of coal and inadequate availability of gas.
With rapid growth in demand for coal, coal supply is proving to be a major cause for
concern. Government of India (GoI) is targeting coal based generation capacity addition
of about 53000MW by 2012 (end of the 11th Plan period), coal based installed capacity
would then be more than 125 GW by 20121. In this scenario, there is an apprehension that
coal companies may not be able to cater to the enhanced coal requirement due to resource
and other constraints. To augment the coal supply, Ministry of Coal, Government of India
decided to allocate captive mines to bulk users of coal, in public and private sectors, and
consequently many captive coal blocks have been allocated to power developers2.
In May 2007, at the Parliamentary Consultative Committee meeting of the Ministry of
Coal3, it was announced that to meet the coal demand about 81 coal blocks with
geological reserves of about 20 billion tonnes have been identified for allocation to
companies, both government and private, for permissible end uses. Out of these, 41 coal
blocks, with geological reserves of about 15.7 billion tonnes, were earmarked for the
power sector. Currently, the allocation coal mining blocks to companies, other than Coal
India Ltd (CIL), is done either under the government company dispensation route4 or
through the captive dispensation route. These blocks for power sector, have been further
categorized in 3 separate lists on the basis of method of allocation which are,
Government Company Dispensation Route, Screening Committee5 Route and Tariff
based Bidding as per the Ministry of Power Guidelines. The details of these blocks
identified for power sector are as follows:
Method of allocation No. of blocks Total reserves
(Billion tonnes)
Government dispensation route 10 6.1
1
Power Scenario at a Glance for All India, CEA, GoI, July 2008; White Paper on Strategy for 11th Plan,
CEA & CII, August 2007
2
Under the provisions of the 1993 amendment to Coal Mines (Nationalisation) Act, 1973.
3
81 coal blocks identified for allocation under captive END-USE, Press Release, PIB, GoI, 18th May 2007
4
Under the Government dispensation route, the block is allocated to a government company and this
company has the right to be used for a specific end-use such as power, steel and cement.
5
A screening committee has been set up in the Ministry of Coal for screening the proposals received for
captive mining of coal & lignite. The screening committee comprises of members representing Ministry of
Coal, Ministry of Power, Ministry of Railway, Ministry of Steel, concerned State Governments, CIL,
CMPDIL, and Department of Industrial Policy & Promotion (Ministry of Industry).
4Method of allocation No. of blocks Total reserves
(Billion tonnes)
Tariff based bidding as per 16 6.0
Ministry of Power guidelines
Screening committee route 15 3.6
Total 41 15.7
According to Ministry of Coal, till 31st December 2007, 170 captive coal blocks have
been allocated, of which 15 blocks allotted to 3 PSUs and 9 private companies have
already started producing coal. Of the 170 captive coal blocks allotted (with reserves 39.3
billion tonnes), 76 coal blocks with reserves of about 23.6 billion tonnes have been
allotted to power sector (with 24 coal blocks allotted in 2007)6.
It may be noted that production of coal through the open cast mining of coal may not
need a lengthy lead time unlike production of coal in the case of underground mining,
which involves a lengthy gestation period, particularly when the stripping ratio is high.
Given the foregoing, one may be misled into believing that coal production can start
within a short period from the allotted coal blocks. However, this is not the case, as the
allocated mines could also involve underground mining.
Discussions with the private sector and public sector coal mine allottees have revealed
that the lead time is atleast 4-6 years, on account of the initial planning, conducting
geological studies to authenticate quantum and structure of reserves, obtaining several
statutory approvals from multitude of authorities & agencies, formulating mining plan
and getting approval, land acquisition, relief and rehabilitation issues, and infrastructure
development.
This note attempts to examine the problems being faced by the allottees of the captive
coal blocks and suggests recommendations which could shorten the actual lead time
involved in commercial production of coal from these coal blocks.
1. Guidelines followed for Identification of Coal Blocks for Captive Allocation
The guidelines adopted for demarcating the blocks are such that the developers would
face a number of problems in quickly bringing the allotted blocks to the production stage.
Ministry of Coal relies on Coal India Ltd (CIL) and Singareni Collieries Company Ltd
(SCCL), for identifying the captive coal blocks. The guidelines adopted by CIL & SCCL
for identifying and allotting coal blocks for captive mining are as follows7:
The blocks offered to private sector should be at reasonable distance from existing
mines and projects of CIL in order to avoid operational problems
Preferably, blocks in greenfield areas having less or no development of basic
infrastructure like road, rail link, etc. may be allotted to the public/private sector for
6
Coal Directory of India 2006-07, Part-I: Coal Statistics, Ministry of Coal, GoI
7
Coal Directory of India 2006-07, Part-I: Coal Statistics, Ministry of Coal, GoI
5captive mining. The areas where CIL has already invested in creating such
infrastructure for opening new mines should not be handed over to the private
sector, except on reimbursement of costs
Blocks already identified for development by CIL where adequate funding is on
hand or in sight should not be offered to the private sector
Public/private sector should be asked to bear the full cost of exploration in these
blocks which may be offered
For identifying blocks, the requirement of coal for about 30 years would be
considered
Others, which include Mine Plan approval under the provisions of Mines and
Mineral (Development and Regulation) Act 1957, approval of the Directorate
general of Mine Safety, and inspection by Coal Controller for an appropriate
enforcement of conservation measures under the provisions of the Coal Mines
(Conservation and Development) Act 1974.
The fact that the blocks are identified at a distance from the existing infrastructure of the
CIL and also that coal blocks are located in remote areas, devoid of all basic
infrastructure like road, rail links, electricity etc, it is difficult for the coal block allottees
to quickly bring the coal blocks to production stage. Development of infrastructure on a
piece meal basis i.e. individually on block by block basis may cause drain on the
resources of the developer, would not bring in economies of scale, and could be onerous
as well. Further, the blocks identified are only regionally explored with inadequate
information, which adds to risk and also reasons for delay in development of the blocks.
Thus, to facilitate speedy development of coal blocks it is recommended that the
following should be considered in identifying and allocating coal blocks:
If there are coal blocks in the vicinity of the CIL/SCCL blocks which are not included
in the expansion plans of CIL/SCCL, then these blocks should also be included in the
list of captive blocks for allocation and not excluded simply because of their
proximity to CIL/SCCL blocks;
In identifying captive coal blocks at ‘reasonable’ distance from existing mines and
projects of CIL/SCCL, it should be considered that the distance should not be at a
disadvantage of the captive coal block developer in terms of available infrastructure
and other facilities;
Without disturbing the present procedure of coal block allotment, the future allotment
of coal blocks should be on the basis of better investigation and for which CMPDIL
and other agencies should be mobilized
Further, in the context of inadequacies in infrastructure associated with the captive blocks
identified for allocation, it is recommended that the Central/State Government agencies
should facilitate development and creation of infrastructure in the mining areas,
particularly in providing right of way, railway clearances, water, electricity, etc. The
Government could also consider pre-identification of non-coal bearing corridors to be
used for rehabilitation colonies and townships.
6The captive block developers should coordinate with other coal block developers in
proximity to jointly fund the development of Infrastructure based on a Master Plan
prepared by an independent agency.
2. Allocation of Coal block
Allocation of coal block should not only look into the promoter background and the end-
use, but should give importance to the technical & financial capability of the applicants
for timely development of the blocks. The process of allocation of the block could also
take into consideration the extent of the preparedness of the developers and the projects.
Further, auctioning approach may be adopted for allocation of coal blocks. However, it
may be noted that auctioning of the block to the highest bidder may not be economically
viable, since it would get translated into a pass through in the cost of end-use product and
thereby adversely affecting the ultimate consumer.
The following approaches, depending on the level of information available for the coal
blocks, may be adopted in taking the auctioning route for allocation of blocks:
Status of block Possible criteria for allocation
Fully explored Lowest cost of power generated
Partly explored Maximum estimated production
Totally unexplored Production sharing formula
Auctioning on the basis of maximum proposed production or production sharing formula
may be workable till sufficient data on the depth, seam thickness and quantity & quality
of the coal is available for the blocks put up for auction. However, once sufficient data is
available for the blocks put up for auction, the criteria for grant of block could be linked
to the lowest cost of power generated from captive coal block.
3. Approvals and Clearances
In the present legislative and regulatory framework, the allottee of a captive coal block
has to obtain multitude of clearances and approvals as provided under the provisions of
the Coal Mines (Nationalisation) Act, Colliery Control Rule 2004, Coal Mines
(Conservation and Development) Act 1974 and rules thereunder, Mines and Mineral
(Development and Regulation) Act 1957 (MMDR), Mineral Concession Rules 1960
(MCR), Environment Protection Act with its rules and procedures, and Forest
Conservation Act with its rules and procedures.
In the federal structure of India, the State Government is the owner of the minerals
located within the boundaries of the State. Thus, though the Central Government
allocates the coal blocks for captive mining, the State Government grants the
Reconnaissance Permit (RP), Prospecting Licence and Mining Lease under the provisions
7of the MMDR Act and Mineral Concession Rules. However, the State Government can
grant the mining lease only with the prior approval of the Central Government as
provided under section 5(1) of the MMDR Act. Central Government approves the
application only after the coal block allottee obtains the mining plan approval and obtains
clearances from several authorities at the Central, State and District level.
Although broadly three clearances are required, i.e. Grant of RP or ML, Environmental
Clearance and Forest Clearance, but depending on whether the allotted block is explored
or unexplored, in forest or non-forest area, etc. clearances may be required from multiple
authorities. The table below indicates the authorities and agencies at the Central and State
level from whom the approvals have to be sought by the coal block allottees before actual
production can begin:
Approvals / Clearances Authority / Agency Involved
Mining Lease
Approval or Purchase of Geological Report CMPDIL (purchase could also be from
SCCL, MECL)
Directorate General of Civil Aviation and
Ministry of Defence (for unexplored blocks
if aerial reconnaissance is conceived)
Mine Plan CMPDIL
Coal Controller
Mine Safety Directorate General of Mine Safety
Mining Technology & Conservation Coal Controller (under the provisions of
Measures, and Coal Categorisation Colliery Control Rules and the Coal Mines
(Conservation & Development) Act)
Mining Lease State Government (Mining Department),
Ministry of Coal (GoI) – Reviewed at
various levels within the Departments at
the State & Central Government level
Environment
EIA / EMP Studies State Pollution Control Board
State Environmental Impact Assessment
Authority
State Water Resource and Water Supply
Department
District Administration (for various aspects
of site clearance)
Coal Controller
Department of Environment (MoEF)
Forest
Forest Clearance & Committee to Advise GoI (MoEF)
Valuing Compensatory Afforestation Office of Chief Conservation of Forests,
(Regional Office of MoEF)
State Forest Department & District
8Authority
Department of Forest (MoEF)
State Revenue Department
Hon’ble Supreme Court
Land Acquisition Ministry of Coal (under provisions of
CBA)
State Department of Revenue
Infrastructure (Electricity, Water, Appropriate Departments of the State
Railways, Road, etc) Government & Ministries of Central
Government
It may be noted that of all the clearances, the MoEF clearance is the most time
consuming, since many departments and issues are involved in getting environmental
clearances and also vast majority of the coal blocks are situated on forest land. Even
geological investigations (which require drilling for exploration) in these areas require
MoEF approval. This approval is a lengthy process and takes a lot of time.
The Guidelines for Allocation of Captive Blocks & Conditions of Allotment through the
Screening Committee, Ministry of Coal, provides for the normative time limit ceilings
(Appendix 1) to ensure that coal production from the allocated captive blocks commence
production within 36 months (42 months in case the area is in forest land) of the date of
issue of letter of allocation in Open Cast (OC) mine and in 48 months (54 months in
case the area fall under forest land) from the date of said letter in Under Ground (UG)
mines. The following chart (drawing upon the ceiling time limit provided in the
Guideline) is an indicative depiction of the schedule of commencement of mining
operations from the time the coal block is allocated:
9The Guideline of MoC, mentioned above, is to ensure timely development and operation
of the allocated captive blocks. In order that the allottee adheres to the timeline, the
allottee has to provide a bank guarantee and the encashment of the bank guarantee is
dependent on achievement of the milestones consistent with the normative time limit
ceilings.
Time limits are specified in the Mineral Concession Rules and other legislations for
maximum time permissible for grant of approval on an application. This is based on the
time to be taken from the receipt of completed application. Since basic information
required for processing the application is available at the district level, particularly for
forest clearance, unless and until all such information is available, the application is
considered incomplete. The time taken at various levels of scrutiny delays the process.
Thus, in view of the large number of approvals required, it is unlikely that the timeline
specified by MoC for development of coal block would be adhered to by the coal block
allottees. The existing provisions of the Acts do not provide for deemed approval status
to applications if the time lines are not adhered to and thus there is no urgency in
disposing the applications within the specified time.
10From the above, the following limitations are thus evident in the process of grant of
clearances and approvals, which would cause significant delay in production from the
allotted captive blocks:
Several parallel clearance & approval processes are to be pursued at the Central
Government and State Government level, and the allottee has to follow-up the
with the applications with various authorities.
Environment and Forest clearance is extremely time consuming and significant
delays arise in the public consultation process, valuation of compensatory
afforestation, identification of non-forest land for compensatory afforestation,
enumeration of trees and completion of cost-benefit analysis by the forest
departments.
The entire process of seeking approvals lack clarity, and often delays in one
process causes delay in the others. Besides, conditions of Mining Lease are not
standardized and could be significantly influenced by individual judgment of the
granting authorities.
A comparative study on grant of mining lease in Australia, Canada and India, included in
the Report of the Expert Group constituted by the Ministry of Steel for formulating
Guidelines for Preferential Grant of Mining Leases (2005), suggests that the time taken
for grant of mining lease in Australia is about 1-2 years (12 + months) and in Canada
about 2-3 years (12-36 months) as compared to 7-8 years in India (though the Mineral
Concession Rule8 provides that the State Government shall dispose off the application for
grant of mining lease within 12 months from the date of receipt of application). The
observations of the study are listed in the following table:
Australia9 Canada India
State is fully empowered to State is fully empowered to State to grant mining lease with
grant mining lease grant mining permit (MP) the approval of the Central
Government
Single window process, Single window process, Approvals are required from
involving 4 agencies: involving 3 government multitude of authorities at the
Department of Minerals & agencies: Central, State and District
Energy Department of Natural levels, with the different
Department of Environment Resource authorities having little or no
National Native Title Department of Environment coordination amongst them.
Tribunal Department of Labour Broadly 3 different clearances
Land Acquisition Authority requiring submission of separate
in Local Government applications:
Minister of Minerals and (1)Approval of Grant of ML
8
Mineral Concession (Amendment) Rules 2002
9
The Mining proposal approval process and minimum timeframes of process as provided in the Regulatory
Guideline No.1 of the Division of Minerals and Energy Resources, Government of South Australia, June
2007 are presented in Appendix – 2 of this note. The regulations laid down by the Department of Industry
& Resources, Government of Western Australia are similar.
11Energy is the final approving (2) Forest Clearance
authority, and takes decisions in (3) Environmental Clearance
consultation with other
Ministries. Close interaction Central Government grants
between Department of forest and environmental
Minerals and Energy and clearances on the
agencies responsible for recommendations of the state
protection of environment. Government.
Mining Lease: Time taken for Mining Lease: The time taken
Mining Lease: Although time
grant of mining lease is 1-2 for grant of MP is 2-3 years.
frame for clearances &
years. Time taken for activities Fixed time frames are complied
approvals are specified as less
involved are fixed & largely with. than an year in the various rules,
adhered to, except in cases the actual time taken are usually
where public consultation
The project can be rejected if 7-8 years for grant of ML.
process & stakeholder
there are strong chances of
participation is involved. adverse socio-economic and Identification of non-forest land
environmental impacts. for compensatory aforestation
Applicants submit application takes long time and at times
for grant of lease with the takes more than a decade.
Mining Registrar in the
Department of Minerals & Requirement of enumeration of
Energy. trees, cost benefit analysis
carried by the State Forest
department is time consuming
(10-12 months)
Mining areas are categorized as The project is first assessed -
per environmental sensitivity. from Environment angle, before
Conditions & procedures for processing for Mining Permit
each category are predetermined (MP). Once the project gets
and identified in each case. clearance from environment
Grant of mining leases in very angle, the proponent makes an
sensitive areas require approval application for MP.
from both houses of Parliament.
Applicant is required to submit Department of Natural Resource -
a Bond to take care of requires a bond or security to
environmental and ensure that reclamation work is
rehabilitation considerations. carried out.
Financial & technical strength Info not available Limited emphasis being given
of the applicant are taken into on the technical and financial
consideration before grant of strength of the applicant.
mining lease.
Minimum term of mining lease The minimum term of Mining Mining lease is granted for 20-
is granted for 21 years. Permit is 20 years. 30 years
12Based on the above observations and discussions, the following suggestions may be
considered to speed up the approval process and grant of mining lease:
A single window approach through nodal agency set up at the State level under the
department of mines with representation from all the concerned departments of
various ministries. The nodal agency can pre-determine the conditions for each
category of land based on environmental sensitivity and the nature of the proposed
activity (prospecting, mining etc.). The nodal agency may complete the requirements
of identification of land for compensatory afforestation, enumeration of trees, cost-
benefit analysis, etc. before inviting application for ML.
Since a single window approach may require change in legal procedure, alternately a
Public-Private Partnership model can be adopted in the form of a shell company
formed for each of the captive blocks allocated, as has been done in the case of
UMPPs in Power Sector wherein in shell companies (formed by the Public sector) are
bid out to the private sector only after obtaining clearances and land acquisition
process completed.
As an immediate remedial measure, MoEF should map and segregate the entire coal
bearing areas into ‘Go’ and ‘No-Go’ areas for each type of lease (Reconnaisance,
Prospecting, and Mining) on the basis of the forest cover and environmental &
ecological sensitivity. The GoI/Ministry of Coal (MoC) by not allotting the blocks
under the ‘No-Go’ areas would prevent wastage of resource and also speed up the
approval process for grant of lease. Thus, for areas defined as ‘Go’, it may be prudent
to allow minimal or no forest & environmental clearances for investigative or
prospecting purposes, with the conditionality that cutting of trees without prior
permission is not allowed. Thus, although the need for detailed environmental impact
studies, assessment of compensatory afforestation & enumeration of trees and cost-
benefit analysis for forest clearance is required for mining approval, the same level of
detail may not be required for limited drilling involved in prospecting or investigative
purposes.
Forest clearance is a contentious issue and has been further compounded by the
development which requires each case of forest clearance a concurrence by Forest
Advisory Committee or the empowered committee, which has to then send a report to
the Hon’ble Supreme Court before sanction is accorded. This procedure needs to be
reviewed and the empowered Advisory Group or the empowered committee & MoEF
could be delegated authority to accord approval in certain defined categories of forest
areas.
MoEF clearances for projects which have a greater probability of commencing
operations before the Eleventh Plan should be given priority.
The approval for the prospecting license by the state government should be issued as
the foremost requirement within a minimum time. The developer could then develop
13the coal block in 2-3 phases, i.e. identify comparatively easier areas within these
blocks (keeping in view government/private land, forest/non-forest land etc.) and get
the required investigations, mining plan, approach etc. for the first phase so that
production could start early, and simultaneously also repeat the cycle of activities in
the subsequent phases. This approach will require due consideration and consents by
Ministry of Coal as well as Ministry of Environment and Forest.
4. Land Acquisition
Unlike other industries siting of a coal mine does not leave room for choice in the land to
be acquired. Land has to be acquired where coal exists, irrespective of population base or
existence/ density of forest land. The present procedure on land acquisition is lengthy and
is prone to litigation. In a large number of cases, a large part of the land belongs to the
government, and in such cases the Government should take measures to transfer the land
to the developers in a shorter timeframe.
5. Rehabilitation of Project Affected People
As regards Rehabilitation of Project Affected People (PAP) there are many prevalent
Resettlement & Rehabilitation (R&R) policies. The Central Government has a National
R&R policy 2007, which provides for the State Governments to have their own policies.
States in proposing their R & R policies to the benefit of the PAPs are more stringent on
the project developers. Also providing employment to all PAP may not always be
possible as new technology driven mining methods is less labour intensive.
It is recommended that the Ministry of Coal should coordinate with the State
Governments to align the State R&R Policies with the National R&R Policy. Further, the
State Governments should facilitate the developers in negotiating the compensation
package with the PAP’s.
For general development and improvement in the coalfield areas, the State Government
could consider creating an “Area Development Fund” by applying a levy on each tonne
of coal produced. This fund could be utilized for social welfare of PAP including their
health & education, improvement of infrastructure, roads, water supply etc.
6. Geological Investigations & Mining plan – alternate agencies
In most coal blocks allocated to companies, detailed geological investigations have not
been done. At present, exploration for coal in India is carried out by Geological Survey of
India (GSI), Mineral Exploration Corporation Ltd (MECL), Singareni Collieries
Company Ltd (SCCL), Directorates of Mines and Geology of some states. These
agencies have limited capacity for drilling of areas (for collating data) and, currently, are
already fully stretched. Out of 22,400 km2 of the coal bearing sedimentary formations
identified by GSI, only about 10,200 km2, or only 45% of the total area, has been
systematically explored through regional and promotional drilling.
14Apart from geological investigations, in the present legislative framework the Mining
Plan is approved by Ministry of Coal (with technical inputs from CMPDIL). This further
delays the whole process.
Thus, new agencies with the competence to perform geological investigations need to be
set up and accredited by the Government of India. These agencies should be independent
and unaffiliated to Coal India Limited or other public sector coal companies. These
agencies or an independent expert group should also be empowered to review and
approve the mining plan, which would be an input to Ministry of Coal.
7. Tapering coal linkage/ marketing of surplus coal
The timeframe for development of coal block is likely to be much longer than a power
plant in view of the various problems faced by the developers. Therefore, there is a risk
that the power plant would be commissioned prior to the commercial operations date of
the coal mine. In order to mitigate this risk of delay in the commercial operations of the
coal mine, Ministry of Coal has decided to provide coal linkage on a tapering basis to the
power producers who have been allotted coal blocks for captive use. The tapering linkage
is being considered by the Ministry of Coal to facilitate the working of end-use plants in
case of development of coal blocks allocated to such consumers does not synchronize
with the operation of end-use plant. In this regard, MoC, in December ’07, came out with
a Guideline relating to issue of LoA/allocation of coal on ‘Tapering Basis’ to various
consumers. However, the application for such tapering linkage would only be considered
if the applicant has an approved mining plan for the coal block allocated.
This is tricky and most of the captive block owners are unlikely to qualify for tapering
linkage even if their end-use plant is in an advanced stage of development. The Ministry
of Coal should consider reviewing this condition for grant of tapering linkage to facilitate
rapid capacity addition in power (considering the huge deficit situation in power and
sustenance of economic growth), and should consider granting tapering linkage based on
technical & financial capability of the developer and preparedness of the end-use project.
Instead of keeping approved mining lease as criteria for considering the application of
tapering linkage, the Ministry of Coal should provide for the condition that the mining
lease should be approved before the power plant commences operations.
8. Joint Allotment of Coal Blocks
In some cases a coal block has been allotted to a number of companies and the allottees
are required to submit Bank Guarantees to safeguard commercial obligations and ensure
timely development of the allotted coal blocks. If some partner companies of the
proposed Joint Venture do not furnish the Bank Guarantee, then the development of the
mine and of the associated power plant with the mine is held up.
It is recommended that if in the consortium of companies granted a coal block, one or
some of the partners are not serious, but the remaining partners are serious, then the
progress of the development of the block by the consortium should not be jeorpardised.
15Thus, companies in the consortium who furnish the Bank Guarantee should be allowed to
proceed with development of the coal block, and the partners who fail to provide the bank
guarantee should be replaced with other companies from among the applicants whose
applications are pending with the Ministry. However, pending the replacement of
partners, the development of the coal block should proceed as usual. In this regard, the
company allocated the coal block, having the requisite financial strength, could also be
given the freedom to choose partners from among the applicants whose applications are
pending with the Ministry.
9. Infrastructure status for Coal industry
Coal industry needs to be given infrastructure status so as to attract more players into this
industry and to incentivise domestic production of mining equipment. The infrastructure
status could be for both coal mining and coal washeries. Infrastructure status for the coal
sector would bring it to par with other sectors such as roads, railways, oil and laying of
oil and gas pipelines.
In the past, this proposal was rejected as bulk of the coal mining was under the public
sector. Coal mining, however, is expected to undergo a major change in the coming years
with production from captive coal blocks mainly by private sector companies. The main
beneficiaries would be power companies as concessions would make coal production
economical that would ultimately help in keeping power tariffs low. Coal companies
would be also able to import capital equipment and spares at concessional rates.
16Appendices
Appendix – 1: Normative Time Limit Ceilings as provided in Guidelines for
Allocation of Captive Blocks & Conditions of Allotment through the Screening
Committee, Ministry of Coal
Sno. EVENT TIME LIMIT
in months from '0' date
1 Allocation 0
2 Purchase of GR 1.5
3 Bank Guarantee 3
4 Mining Lease Application 3
5 Mining Plan submission 6
6 Mining Plan approval 8
7 Previous approval application 11
8 Previous approval 11
9 Forest Clearance application 12
10 Forest Clearance 18
11 Environment Clearance Application 12
12 Environment Clearance 18
13 Mining Lease grant 24
14 Land acquisition begin 9, 19
15 Land Acquisition 30, 36
16 Opening permission application 34, 40 for OC
17 Opening permission grant 35, 41 for OC
18 Production 36, 42 for OC
48, 54 for UG
17Appendix – 2: (a) Flowchart of mining proposal approval process
Source: Mining Approvals in South Australia, Regulatory Guideline No.1 of the
Division of Minerals and Energy Resources, Government of South Australia, June 2007
18Note: PIRSA - Department of Primary Industries and Resources; TRC - Tenement
Review Committee - PIRSA independent peer review committee for lease application
assessments; DAC - Development Assessment Commission; EIC - Extractive Industries
Committee - a Subcommittee of DAC; EPA - Environment Protection Authority; MARP
- Mining and Rehabilitation Program; SEB - Significant environmental benefit (offset for
native vegetation clearance)
19Appendix – 2(b) Minimum Timeframe of Process
2021
Source: Mining Approvals in South Australia, Regulatory Guideline No.1 of the
Division of Minerals and Energy Resources, Government of South Australia, June 2007
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