By Our Correspondent
BHUBANESWAR: The Union Finance Minister Nirmala Sitharaman’s announcement on reforms in coal sectors while keeping no eligibility conditions for a commercial Coal Miner to participate in auctions will facilitate bid competition, the benefit comes with certain costs.
Lack of eligibility condition may get unserious and inexperienced bidders in the fray as compared to a certain eligibility condition that requires some demonstrated experience of having handled coal mining projects in the past with due care given to environmental, social and health matters. At the least, there should be a certain threshold for net-worth so as to attract financially sound parties that commit the investments required at the development stage and muster the technical strength required for developing and planning a green-field coal-block.
With the abundant inventory within India, there’s a clear a need to reduce imports, especially thermal coal, imports of which were around 200 million tonnes last fiscal. A huge outgo of foreign exchange, thus, can be easily contained.
Further, the spate of cancellations of both coal and iron ore mining projects seen in the past years have made investments in mining sector riskier, especially for a global miner. Accordingly, ease of statutory approvals, faster implementation of projects under the proposed package, and consistency of regulations and security of tenure will go a long way in achieving the end objective of commercial coal mining.
A similar story unfolds on the non-coal side, around 80 blocks comprising iron-ore, limestone, and other minerals have been auctioned in the last five years with 20 iron ore mines auctioned in Odisha very recently. Reasons are similar – delayed approvals and land acquisition. While details of the proposed 500 mineral blocks, including the mineral type or stage of exploration or status of other preparatory works, is not clear, the key is to expedite the development stage so as to realize the economic benefit and importantly create jobs which is the need of the hour right now.
Auctions of bauxite and coal are regulated under different rules with their own set of eligibility criteria and bidding parameters, while different government agencies oversee the same. So, a joint auction needs to clearly provide that incremental advantage similar to bidding for an aluminum plant.
Stamp duty combined with upfront payments and submission of performance security at the time of mining lease execution poses substantial economic burden for the miner. Accordingly its rationalisation will be helpful, especially in the current Covid-19 scenario when the metals and mining sector is facing a slowdown. While non-captive mining in non-coal minerals has not been a major issue, eliminating the distinction further, will be a positive for the sector as it will help sale of material that’s not required by the end use plant of the operator and help dispose of accumulated stocks.
The Indian Bureau of Mines (IBM) currently publishes an Average Sale Price every month for different non-coal minerals to which the auction payouts and royalties payable to the state government are linked. It’s not clear if the new mineral index will be a more refined version of the IBM published index or will be altogether a new index. A number of mineral blocks have already been auctioned based on the extant IBM index and the methodology it employs, so a calibrated approach may be required here when switching over to the new mechanism.
Odisha’s Coal sector, which was remain neglected for about 4 decades , will soon take a new look when the Union Coal Ministry go for open auction of Coal Blocks in July this year.India is the world’s second largest producer of coal after China, having cumulative total coal resources of 319.020 billion tonnes (till 2018) and is dependent on coal for many of its core sectors. Odisha , which houses 79,295 Million ton of coal deposits, is the second most Coal bearing State in the Country while India is the 5th biggest coal bearing Nation in the World. In past, Odisha Government only auctioned 1 coal block-Jamkhani, which had won by Anil Agarwal’s Vedanta Limited. The Coal Ministry is auctioning as many 27 blocks.
Odisha has hiked it coal production by 23 % in last 5 years, while National Coal Production increased by 24 %. Out of the 27 Coal Blocks, 21 have been reserved for auction to all Non Regulated Sectors, such as Steel, Cement and 6 Coking Coal Mines for Iron Ore and Steel. In case of allotment, 5 Coal mines are for Power sector, 9 for sale of Coal and 1 for Iron and Steel. India’s coal production was 730.54 Million ton during 2018-19 with a growth of 7.9 %
Private players like Rungta Mines Limited, Jindal Steel and Power Ltd, JSW Steel-Energy, Essel Mining and Industries Ltd, Tatas, Sesa Goa, Vedanta Industries Ltd, Adani Group and global players like Rio Tinto, BHP Billiton, PesBody, Glencore and Vale are among those eyeing on Odisha’s Coal block, sources said.
