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Coal block ordinance to help prevent supply disruption

NEW DELHI: The government on Monday allowed private companies in power, cement and steel to get their own coal mines through e-auctions, thus clearing the logjam created by the Supreme Court order annulling all allocation of captive mines since 1993.This makes the process through which end-users of coal can acquire a steady and assured supply of coal more transparent, but does not amount to denationalization of the sector. Some experts said this was a “half-hearted” move to reform the coal industry which has proved a bottleneck for the infrastructure industries. Government sources, however, said that this is just a beginning and much more is to come.The move came in the form of an ordinance which was okayed by the Cabinet Committee on Economic Affairs. Announcing the decision, finance minister Arun Jaitley said the government had recommended to the President promulgation of the ordinance.While the ordinance primarily aims to make possible auctioning of the cancelled coal blocks, it would have an enabling provision for commercial coal mining by private companies “in future” – when in the future, however, was left unsaid.Jaitley emphasized this was not the beginning of denationalization of coal mining and state-run Coal India’s turf would be protected. Power minister Piyush Goyal added his bit by saying the national miner’s interests would be “fully” protected. This assurance would allow Coal India to fetch a good valuation when it goes to the market for divestment. “The original Nationalisation Act remains and will remain and Coal India Ltd will be fully protected,” Jaitley said.Coal mining was nationalized in the early 1970s and private mining is allowed only for captive use by power, steel and cement plants.The ordinance would allow the government to take over the cancelled mines. First, blocks would be allotted to government entities such as NTPC , state electricity boards and mining companies of state governments. This would protect the interest of electricity consumers.For private companies, the blocks would be put in a central pool for bidding through an e-auction. The first round of the auction would be completed in the next three-four months, which is well within the six-month deadline set by the Supreme Court to stop production from the cancelled mines.The entire proceeds from the auction would go to the states where these mines are located. “This will financially empower the eastern states in particular (which have most of the coal mines) and lakhs of labourers would get employment, while bank capital held up with the allottee companies would be fruitfully utilised,” the finance minister said.The biggest beneficiaries would be states like Chhattisgarh, West Bengal, Jharkhand and Odisha. Madhya Pradesh, Maharashtra and Andhra Pradesh would also benefit.“The entire mess that the UPA had left behind from 2005 onwards over the next four months would be cleaned up,” Jaitley said, adding coal worth $20 billion, which was being imported annually, would be domestically substituted through this measure.