KOLKATA (miningweekly.com) – With commercial mining of coal unofficially on the backburner, India’s Coal Ministry has tweaked the rules of forthcoming coal block auctions to permit free merchant sales of production.

The Coal Ministry has invited tenders for 18 coal blocks for captive mining by ‘non-power’ companies with six blocks exclusively reserved for the iron and steel industry, while cement, captive power plants and even steel producers will be eligible to put in bids for the rest of the blocks.

Under the revised and liberalised rules for the forthcoming auctions, a successful bidder will be permitted to use a quarter of production from a block for free merchant sale. Currently, a captive coal miner is not allowed any diversion of coal and the entire production from the captive mine is to be used exclusively for the end-use plant specified in the bid document submitted by the investor.

Although not officially acknowledged, sources in government pointed out that with commercial coal mining by private miners unlikely to be pushed through, the Coal Ministry reckoned that permitting free merchant sale of coal of 25% of production from each captive block would increase supplies of dry fuel in the market at a time of mounting shortage and inability of State miner Coal India to rapidly scale up production to meet rising demand from thermal power generation companies.

At the same time, permitting free merchant sale would offer an additional incentive for captive coal miners particularly against the backdrop of the fact that, last year, the Coal Ministry had to abort a round of auction in the face of tepid response from investors. Another round of auction in 2016 was also cancelled owing to lack of investor response.

The government has also decided to offer more flexibility in production norms in captive coal mining to enable the miners to plan according to changing consumption patterns of their end-use plants and volumes that could be put out for merchant sale.

Any successful bidder at the next round of auction will have to produce at least 80% of scheduled production in the year in the case of opencast mines and a minimum of 70% in the case of underground mines, but not less than 90% of scheduled production in a block of five years, as per new auction rules. Current rules stipulate that production below 90% in a year will make the miner liable for financial penalties.