In the first major step towards opening the coal mining sector, the government will start allocating coal blocks to state governments for commercial mining. The move, likely in a month, will put an end to the Centre's 41-year-old monopoly over commercial sale of coal.

The coal ministry will allot non-operational mines to state governments for commercial mining and sale of coal for end use in the iron, steel, cement and allied sectors. This will bring business and revenue to coal-rich states, which have so far received only royalty from private companies mining coal for captive use.

"Non-operational mines from schedule-I will be allotted to state governments to extract coal for commercial usage and market sale. States could then sell this coal to the utilities under their umbrella or any private company for various end uses, as specified in the ordinance," said a senior official. This is pursuant to an enabling provision on commercial mining and sale of coal in the coal ordinance (special provisions), 2014.

Sources say the Centre is already in talks with states to allot mines for commercial use.

However, a lot will depend on the fate of the ordinance in the Rajya Sabha, which has referred it to a select committee. So far, the ordinance has been promulgated twice.

The coal ministry will also issue guidelines for the appointment of mining development operators (MDOs) by states. It is likely the guidelines will be announced by April.

Companies such as Adani Enterprises, Reliance Power and Monnet Ispat are likely to benefit from the move. These companies' plans to operate as MDOs were hit when the Supreme Court, in August 2014, cancelled all coal block allocations through the past two decades.

The coal ordinance has inserted section 3A in the Coal Mines Nationalisation Act to enable joint ventures by central and state governments and their companies, and any other company, for mining operations in India "in any form, either for own consumption, sale or for any other purpose", in accordance with a licence granted by the state government concerned.

The ordinance classifies mines and their assets into three schedules. The first has all the 204 mines de-allocated by the Supreme Court. Now, mines under this schedule will be allotted to states. Subsequently, the government will consider commercial mining by private companies.

There are 74 mines with specified end use in the power, steel and cement sectors. These mines are under the second (42 operational mines) and third (32 mines in various stages of development) schedules. Of these, the coal ministry has allocated 40 mines with specified end uses to private companies, through an e-auction. The government received bids for revenue amounting to Rs 2.35 lakh crore through 30 years, to coal mine-bearing states.

It is also allocating 42 mines to states and state-owned companies for specified end uses.