India's Coal Ministry to Allot Isolated Coal Patches, Float Global Tenders to Revive Abandoned Mines

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Researched by Industrial Info Resources (Sugar Land, Texas)--India's coal ministry will finalize rules and regulations for an allotment of isolated coal patches by December 2010, to boost coal production in the short term. The coal ministry has identified 20 isolated patches across the country, each of which is estimated to have reserves of about 10 million tons.

According to coal ministry officials, isolated coal patches, unlike coal blocks, have remained unexplored because of the small, uneconomic size of reserves, making them unviable for development by large user industries. However, against the backdrop of a rising demand-supply gap of coal in the country, the ministry has taken the view that these patches of coal reserves could be allotted for use by local industries that fall in the small- and medium-scale sectors.

"We will soon make a decision on development of isolated coal patches to increase production that will be beneficial to local industries in the vicinity of the coal patch," said Sriprakash Jaiswal, India's coal minister. "We will have to decide the basis of allotment. In my view, auction is the only equitable basis for allotment of the coal patches to user industries, and we will frame rules accordingly, which will then be implemented by governments of the states under which the coal patches fall."

Jaiswal also said that the ministry will soon float global tenders for the development of abandoned mines across the country. Unlike isolated coal patches under the authority of the state governments, abandoned mines fall within the purview of the Indian government. The ministry of coal has identified 27 abandoned mines estimated to have reserves of 500 million tons, and has proposed reviving and developing these through joint ventures with global investors.

Isolated coal patches are under the purview of the Coal Mines Nationalization Act of 1973, under which the authority to allot such reserves falls to the state governments and that coal extracted from such patches cannot be transported by rail and can be utilized only by local industries in the vicinity. Isolated coal patches also have been left out of the purview of the National Mineral (Development and Regulation) Bill 2010, which will be passed into a law in the next session of Parliament, starting in November. Under this proposed law, coal blocks will be put up for auction for captive users, scrapping the present system of allotment. Ministry officials said that since coal patches did not fall within the purview of the new law, separate rules and regulations will have to be framed for the auctioning of these patches.

The coal ministry's decisions on coal patches and abandoned mines are aimed at bridging the demand-supply gap in the short term. Total production of coal this fiscal year will be 572.73 million tons, against the current demand of 654 million tons, leaving a shortfall of 82 million tons. According to the coal minister, application for coal supplies for 100,000 MW is pending with the power ministry. India is facing an acute shortage, and no coal is available for the 28,000-MW power generating capacity for which linkages were granted until November 2008.

Given such an acute shortage scenario, the coal ministry has issued notices to 93 companies threatening cancellation of coal blocks allotted to them for failure to develop them within a specific time frame. "We will not tolerate lessees of coal blocks to idle on their allotted blocks," Jaiswal said. "We cannot allow the situation to continue. If lessees cannot develop the blocks, we shall cancel their allotment and put them up for auction, so that coal production can be boosted within a reasonable time."

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