KOLKATA (miningweekly.com) - The Indian government was considering placing restrictions or even barring joint ventures (JVs) between government and private companies that were developing coal assets, and limiting the involvement of the private sector to mine developer operator (MDO).

According to an official in the Mines Ministry involved in finalising the fine print of the Mines and Minerals (Development and Regulation) Bill 2011, the proposal to restrict joint ownership of coal assets would be incorporated in the proposed legislation.

The official said that a Parliamentary committee overseeing the draft mining legislation had taken a dim view of government mining companies securing coal assets through the preferential government allotment route and then entering into JVs with private companies, thereby sharing ownership of the coal asset.

The committee had opined that such JVs between public and private companies were tantamount to backdoor entry of private capital into coal mining, which was an exclusive domain of government under the country’s coal nationalisation laws.

As a result, the government would incorporate the necessary clauses under which government mining companies would be limited to appoint private miners under MDO agreements in the interest of speedy development of the coal asset through modern and upgraded technology, which might not be available to the government mining company.

For instance, companies such as Moser Baer Projects Private Limited has a JV with Chattisgarh Mineral Development Corporation Limited for development of the Sondha coal block, with the provincial government holding 51% of the equity and Moser Baer the balance.

Similarly, Adani Group has a coal-mining venture with the Rajasthan provincial power generation company for the development of a coal asset in the central Indian province of Chattisgarh. The Monnet Group was also seeking to form a JV with the Madhya Pradesh State Mining Corporation for development of another coal asset.

However, the Mines Ministry was as yet undecided on how the new restrictions would be made applicable in the case of existing JVs, the official said.

The options being considered included either the divestment of the stake in the JV in favor of the government partner or transfer of private equity to another government company. The private investor could also be given the option to be a preferred partner within a MDO framework, the official added.

However, several private investors in coal mining have communicated to the Ministry that such restrictions would go against the government’s avowed policy thrust toward greater private sector involvement in the mining sector as well as the fact that in most of the ongoing JVs total private investment was more than investments committed by government companies.

The Mines Ministry, in consultation with its counterparts in coal, has maintained that private sector investment options would always be open through the auction of coal blocks and other minerals, which the government was currently working on and is due to go on the block later this year, the official said.