Recommended Policy Reforms

4.3.6.1 Phased Deregulation of the Indian Coal Sector: It is important to

deregulate coal sector and allow commercial mining of coal, to bring in competition and thereby improve efficiency of the sector. As a first step, captive block owners who have been able to set up their end-use plants and are able to produce surplus coal after meeting the full normative requirements of their end- use plants should be allowed to sell the excess coal to registered end-users at a fair price to be determined by the regulator. A market platform where all the captive block owners (as sellers) and end-users (as customers) may trade needs to be created. Over a period of time, sale of coal should be allowed freely at market determined prices.

4.3.6.2 Creation of the Institution of a Coal Regulator: Concomitant with

initialization of deregulation a Coal Regulator needs to be appointed with key responsibilities of mine plan, fixing prices for sale of coal, checking illegal mining, etc. Setting up of Coal Regulator to oversee mining related clearances and administer policies related to coal mining will be beneficial for the industry.

4.3.6.3 Emphasis on Unlocking Underexploited Coking Coal Reserves through Calibrated Deregulation: The Indian coal mining industry is dominated

66 country. Of the total raw coal production of 531 million tonnes per annum, less than 17-18 million tonnes are of washable grade raw coking coal, despite the fact that the country has 33 billion tonnes of reserves of coking coal and Coal India has a share of 90% in the reserves. As the focus of CIL is on power grade coal, coking coal production in the country has stagnated for last several years. The following policy measures are recommended in the context of developing a domestic coking coal base in the country.

i) The existing coking coal mines should be de-merged from CIL and a separate Coking Coal company should be formed. This new entity can

continue to be under the government to begin with and to remain fully responsible for coking coal mining development. Any non-coking coal that is mined in the process can be offered to CIL at a reasonable price to be fixed by the regulator.

ii) The government may also consider additionally or in substitute of the above, offering coking coal assets to steel producers for development on tender basis to go to the highest bidders. The steel companies getting such mines should also be allowed to sell the surplus coal mines in the open market.

iii) There are several virgin coking coal assets currently lying undeveloped with CIL and for which CIL does not have plan for development in the XII five year Plan. These assets may be put on auction and the highest bidder may be allocated these blocks.

4.3.6.4 Systematic Exploration to Expand Mineable Reserves Base: This

would need taking up systematic drilling and exploration programmes.

4.3.6.5 Promote Beneficiation for Low Grade Coal: There should also be more

focused efforts towards beneficiation and washing of coal so as to reduce dependence on imported coal. Developing capability to beneficiate lower grade coking coal for use in steel industry should be an area of priority. The proposal of Coal India Ltd to beneficiate coal by installing new washeries with state of the art technology / expertise available internationally will go a long way in improving the yield of washed coking coal in India. More than 30 million tonnes of low grade coking coal gets diverted to the power industry due to lack of washery technology and washing capacity in the country. This should be gradually stopped and instead the coal should be supplied to the integrated steel plants for beneficiating and using in their own plants. Long term commitment to such supplies should be linked with the steel companies based on firm proposals. 4.3.6.6 Intensive Exploitation of Deep-seated Coal Reserves through

Underground Mining: Increased domestic production of coking coal would also

involve intensifying exploitation of deep seated coking coal reserves through appropriate underground mining technology to support the growing demand for coking coal and reduce dependence on import. In India, major coking coal resources are lying deep underground. There is a need to develop or import underground mining technologies, so as to exploit the coking coal deposits of the country to the fullest extent. One such case in point relates to the Jharia Coal Fields - one of the largest coking coal mines in the world, from where coking coal

67 could not be extracted on a significant scale due to raging fires. An action plan named Jharia Action Plan has been prepared to shift the population from there and extract the coking coal from Jharia. Although the Government has allotted funds for Jharia Action Plan, constant and regular monitoring by the central government is necessary to ensure its success which is critical for increased availability of prime coking coal in the country. Towards this end, an Apex Committee may be formed with a member each from the Ministry of Coal and Ministry of Steel as also from the state governments.

4.3.6.7 Measures to Boost Production in the Underexploited Captive Coal Blocks: It is interesting to note that despite growing domestic market and rising

import dependence, production from captive coal mines has remained below potential. The production levels have stagnated, mainly due to delays incurred in getting multiple regulatory clearances and in acquiring land. Captive mining has the potential to be one of the major sources of coal supply in the country, provided a well defined process with prescribed time frame for statutory clearance is developed. Several initiatives/reforms are required to boost production from captive blocks. These are as follows:

i) Create a nodal agency at the state level to monitor and ensure speedy

clearances on a single window basis with members drawn from the Ministry of

Coal (MoC) and Ministry of Environment and Forest (MoEF) besides relevant departments of the state governments.

ii) Set up a Local Development Authority (LDA) in each coalfield area (exact area to be defined) which should have representation from the coal block owners as also from the district administration and a representative of the MoC. The LDA can be entrusted with the responsibility of creating a master plan of local infrastructure including rail & road connectivity, utilities like power, water and residential townships having medical and educational facilities. The block owners would contribute on the basis of their planned production as per the mine plan. iii) Amend Contract Labour Act to allow coal mining and associated

activities through contract mining as in countries like Australia, Indonesia,

etc. which have a developed mining industry.

iv) Corporatize contract mining by putting in place strict monitoring and

compliance to payment of minimum wages, scientific mining and safety norms.

Conservation of resources is extremely important and hence monitoring of mine plans is essential.

v) Allow sale of surplus coal production over and above the requirement of

the end-use plant by the block owners - Should this not be allowed by the

present law, the same should be allowed to be sold at a discounted price to Coal India Ltd. (CIL).

vi) Mandate extraction of coal in Block Barriers - Coal locked in block barriers can get lost forever; in fact, the 7.5 m barrier on the surface will increase considerably at higher depths. Hence, it should be mandated in the mine plan itself that the adjacent block owners must work out a joint mechanism to extract this coal.

68 vii) Consolidate small plots for scientific mining/ Artificial block boundaries —To accommodate a number of competing claims for coal by different parties, sub-optimal blocks have been allocated in the past which may not have sufficient area or strike length for scientific exploitation. Hence, it should be mandated that adjacent block allottees of such small plots should develop such blocks as a single entity.

viii) Set Realistic Timeline for block development based on a more wide spread consultation to fix the FC and land acquisition timelines.

ix) Prior approval of the Ministry of Coal - should be given at the time of coal block allocation in both the cases of PL and LM.

4.3.7 Rationalize Extant Distribution and Pricing Mechanism and Promote