KOLKATA (miningweekly.com) – The Indian government is considering floating a special purpose vehicle (SPV) in the mining sector with the participation of government-owned miners as well as specialised mine developer operators (MDOs).

The proposal by the Mines Ministry was aimed at fast-tracking private public partnerships (PPPs) in the mining sector to establish standalone specialised mining companies, an official engaged in the move said.

The Mines Ministry would seek coal major Coal India Limited’s (CIL’s) leadership of the SPV in collaboration with user industries like NTPC, the country’s largest thermal power generator, the official said.

In the interim, NTPC was considering setting up a separate mining division to develop ten coal blocks allocated to it for captive consumption with estimated reserves of three-billion tonnes.

Various provincial governments have their own mining companies and it would make strategic sense to pool financial and management capabilities of these entities, along with CIL and NTPC, to develop a single mining company, the official added.

It would also be more efficient for an SPV to strike a collaboration with overseas MDOs and ensure faster development of mineral resources across the country, the Ministry rationalised.

It had even proposed that the PPP of SPV and MDO might bid for CIL’s coal blocks that are yet to be developed.

Various collaborators in the SPV might even be allowed to mine and sell coal and other minerals and share profits in proportion to the partners’ equity holding in the mining entity.

However, in case the specialised mining entity did not have marketing expertise, the resource could be lifted by CIL or other user industries through long-term purchase contracts.

This option was already being adopted by various mining companies owned and operated by provincial governments.

The proposal of an SPV followed a report by a committee on infrastructure financing, which advocated establishing such a company, proposing that CIL take the lead or that the government float an independent public sector company to undertake mining projects, especially coal blocks.

The committee felt that at a later stage, equity in the public sector company could be divested through offers to global mining companies.

However, the Mines Ministry was currently in favour of an SPV led by existing government companies like CIL, NTPC and Steel Authority of India Limited, which either have mining operations or major consumers of mineral resources.

The Mines Ministry was expected to push for the SPV as soon as the new government takes charge after the Indian national election ends in mid-May.