Karandikars & Associates

Coal Production Captive Blocks

Nationalisation of coal mines was undertaken in the 1970s to end unscientific mining practices and poor working conditions of labour in the private coal mines in the country. Under the Coal Mines (Nationalization) Act, 1973, coal mining was exclusively reserved for the public sector

By an amendment to the Act in 1976, two exceptions to this policy were introduced, allowing:

1. Captive mining by private companies engaged in production of iron and steel
2. Sub-lease for coal mining to private parties in isolated small pockets not amenable to economic development and not requiring rail transport

The Act was amended in June 1993, to allow private sector participation in coal mining for generation of power, for washing of coal obtained from a mine or for other end uses to be notified by Government from time to time

In March 1996, production of cement was allowed as an end use for captive mining of coal

The July 2007 amendment made production of Syn-gas obtained from coal gasification and coal liquefaction also as an end use

The policy of allotment of Captive Coal Blocks, that was adopted in 1993, saw an allotment of 218 coal blocks by end of 2013-14

In 2014, the Supreme Court of India cancelled 204 coal mine/blocks which had been allocated to the various Government and private Companies since 1993 under the provisions of Coal Mines (Nationalization) Act, 1973

In 2015, the Central Government brought in Coal Mines (Special Provisions) Act to re-allocate these coal blocks. The Act was promulgated to provide for allocation of these coal mines and concomitant responsibilities like vesting of the rights, title and interest in and over the land and mine infrastructure together with mining leases to Successful Bidders and Allottees with a view to ensure continuity in coal mining operations and production of coal. Subsequently, the Coal Mines (Special Provisions) Act, 2015 was passed by the Parliament which was notified as an Act on 30.03.2015

The auction-based regime introduced in 2014 allowed private sector participation, however, it was limited to captive usage in own end use plants

The sector has been opened up for commercial coal mining by private players in 2020 and first ever successful auction of commercial mining was launched by the Prime Minister on 18.06.2020

Commercial coal mining auctions are completely different from the earlier regime of restricted sectors, use and price. Now, there are no such restrictions at all. The auctions have terms and conditions which are very liberal, allowing new companies to participate in the bidding process. Reduced upfront amount, adjustment of upfront amount against royalty, liberal efficiency parameters to encourage flexibility to operationalize the coal mines, transparent bidding process, 100% FDI through automatic route is allowed and reasonable financial terms and revenue sharing model based on the National Coal Index

For the year 2023-24, coal production from captive blocks for power was estimated at 121.3 million tons, from Non Regulated Sector (NRS) captive blocks was estimated at 8.4 million tons and from captive blocks of commercial mining was estimated at 17.5 million tons, leading to total production from captive blocks of 147.2 million tons

If we scroll down the above Table, for the year 2000-01, the total production from captive blocks was just 3.8 million tons

Production from captive blocks has grown rapidly in the last few years, from 54.9 million tons in 2018-19, to 147.2 million tons in 2023-24