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Introduction

India has large reserves of coal suitable for thermal power generation and metal manufacturing. Several ultra mega power plants are planned over the next five years, which could utilise over 400MT per annum of coal. The coal sector is expected to grow rapidly, driven by the increasing gap between power supply and demand due to rapid economic growth. There is also a need for investments in improved technology, higher production and better productivity at existing mines, as also the need to explore and develop new coal mines. Considering the limited reserve potential of other fossil fuel energy sources and the fact that development of renewable energy sources are still a distant goal, coal continues to be vital to India's energy needs. The Planning Commission of India recently stated that coal will remain the most viable fuel for driving sustained economic growth over the next 25 years - a fact strongly reinforced by the hugely successful recent public offering of CIL, the biggest IPO in India till date. India's Coal Reserves As a result of exploration carried out up to the depth of 1,200m, as on April 1 2009, India has estimated hard coal reserves of around 267.21 billion tonnes - one of the richest in the world, of which 105.82 billion tonnes are proven.

India's Coal Reserves As a result of exploration carried out up to the depth of 1,200m, as on April 1 2009, India has estimated hard coal reserves of around 267.21 billion tonnes - one of the richest in the world, of which 105.82 billion tonnes are proven. Nodal Authority The Ministry of Coal has the overall responsibility of determining policies and strategies in respect of exploration and development of coal and lignite reserves and sanctioning of important projects. These key functions are exercised through its public sector undertakings, namely, Coal India Limited ("CIL") and Neyveli Lignite Corporation Limited ("NLC") and Singareni Collieries Company Limited ("SSCL"). CIL accounts for 85% of coal production, followed by SCCL (8.5%), and captive producers (6.5%).

Private Sector Investment


The 1973 Act was amended in 1976 terminating all mining leases on coal held by private lessees to allow (a) captive mining by private companies engaged in the production of iron and steel, and (b) sub-leasing to private parties of isolated small pockets not amenable to economic development and not requiring rail transport.

In 1993, the 1973 Act was further amended to allow captive coal mining in the private sector for power generation, washing of coal obtained from a mine and such other end uses as notified by the Central Government from time to time. Coal gasification and coal liquefaction have also been notified as specified end uses. In March 1996, the Central Government allowed captive mining of coal for production of cement. The restriction of captive mining does not apply to state-owned coal mineral development undertakings. Commercial coal sales can legally only be undertaken by and through public sector coal companies (and their subsidiaries) and coal produced from captive mines by the private sector cannot be sold on the open market.
In February 1997, the cabinet approved a proposal to amend the 1973 Act to allow noncaptive coal mining, which met with stiff opposition from trade unions, who expressed concerns that pre-nationalization ills like unscientific mining practices, environmental degradation and labour exploitation, would re-occur. Due to this, it took at least three years for the Bill to be re-formulated after taking care of the concerns of the trade unions, and it was introduced in Parliament in 2000. The Bill is, however, yet to be passed.

Foreign Direct Investment

Currently, foreign direct investment has been allowed upto 100% under the automatic route as follows: Coal and lignite mining for captive consumption by power projects, iron, steel and cement units and other eligible activities permitted under and subject to provisions of the 1973 Act; Setting up coal processing plants like washeries subject to the condition that the Indian company will not undertake coal mining and will not sell washed coal or sized coal from its coal processing plants in the open market. In addition, the Indian company will supply the washed or sized coal to those entities who are supplying raw coal to coal processing plants for washing or sizing.

Coal blocks are generally awarded subject to compliance with several conditions including that: the allocation is made to meet the coal requirement of the permitted end use project, and is meant for captive use in the allocate company's own specified end use projects or that of associates/end use company(ies) in case of a mining company. coal production from the captive blocks is required to commence within 36 months (42 months in case the area falls under forest land) of the date of allocation in opencast mine and in 48 months (54 months in case the area falls under forest land) from the date of allocation in underground mine. in respect of fully explored blocks, the allocatee company will need to buy the geological report from the Central Mine Planning & Design Institute Limited within 6 weeks of the date of allocation.In respect of an unexplored block, the allocattee company will need to apply for a prospecting license within 3 months of the date of issue of allotment. Exploration would need to be completed and geological report prepared within 2 years from the date of issue of prospecting license. in respect of explored blocks, the allocatee company would need to submit a mining plan for approval within six months.In respect of unexplored blocks, the mining plan should be submitted for approval within two years and six months from the date of issue of the letter of allocation. The allocate company would also have to make its own arrangement for transportation of coal mined. The allocate company would need to approach the Central Government/concerned State Government for necessary permissions/clearances, etc., for attaining mining rights and related matters (for example, environmental clearance, forest clearance, land acquisition, etc.), a process that could take between 2 to 5 years.

General Conditions of Allocation

A coal mine and the accompanying infrastructure building is indeed a timeconsuming process

It is to be noted that the Central Government periodically monitors and reviews the development of allocated blocks as well as end use plants by coal companies. . Allocation/mining lease of the coal block may be cancelled, inter-alia, if it is determined that progress of coal mining project or implementation of specified end uses is unsatisfactory, or breach of any conditions of allocation.

Mining lease The allocatee company will be required to obtain a coal mining lease from the concerned State Governments under the Mines and Minerals (Regulation & Development) Act, 1957. State Governments can grant coal mining leases only with the previous approval of the Central Government. Before the approval of the Central Government is accorded, the allocatee mining company is required to get its mining plan for the proposed coal mining area approved from the Central Government. Coal mining leases are now granted for 20-30 years initially and can be renewed for a further period of 20 years with the previous approval of the Central Government. Coal mining leases are ordinarily subject to a ceiling of 10 sq. kms. of area.