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Govt approves allocation of coal mines to PSUs for sale of coal

17 Dec 2015 Evaluate

Considering the high demand of coal in the country than the current level of production and supply, the Cabinet Committee on Economic Affairs (CCEA) has given its approval for allotment of coal blocks to central and state public sector undertakings (PSUs) for the sale of the fossil fuel mainly to medium, small and cottage, under the provisions of the Coal Mines (Special Provisions) Act, 2015. This has ended the 41-year-old monopoly of the central government over mining and sale of coal.

This move is expected to improve domestic production of coal in order to meet growing demand of the economy, potentially cutting down imports. The move is likely to benefit the mineral-rich states to earn surplus revenue, which were until now earning royalty from private companies mining coal for captive use. Currently, states are allotted coal blocks but with specified end-use such as power production, steel and iron production etc.

The coal bearing States shall be getting additional revenue from such coal mines equal to the amount of royalty on the quantity of coal produced on a monthly basis during the lease period/life of the mine as well as one time upfront payment which is 10 percent of the intrinsic value of coal in the mine in three installments in the first year of allotment. It is expected that the incremental coal produced from such coal mines would cater to the unmet demand of the coal in the country, especially of medium, small and micro industries and bridge the gap between demand and supply considerably.

In the last fiscal year 2014-15, the domestic production of coal was 612.4 million tonnes (Provisional) ,as against a total consumption of 825.6 million tonnes (provisional).The gap between consumption and domestic supply is met through imports. Due to sustained efforts for increase in domestic production, import of coal that was showing positive growth since 2011-12, registered a negative growth of 12.2 percent during April-November 2015. However, the gap between the demand and the supply continues to be, large.

 

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