captive coal mining final

7/30/2019 Captive Coal Mining Final

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Captive Coal Mining by Private Power Developers Issues and Road Ahead:

Summary of recommendations

Ministry of Coal has allocated captive mines to bulk users of coal, in public and private

sectors. However, very few of the coal blocks have started production. Summarizedbelow are the recommendations which may be taken up by the Central Government, StateGovernment and Developers to facilitate the rapid development of coal blocks:

1. Guidelines followed for Identification of Coal Blocks for Captive AllocationCentral Government: With reference to identification of coal blocks for allocation, the

following should be considered:

Coal India Ltd (CIL)/ Singareni Collieries Company Ltd (SCCL), currently, identifyblocks for allocation to private sector which are at a distance from the existing blocksof CIL/SCCL. This practice should be modified and blocks which are in the vicinity

of CIL/SCCL and which are not included in the expansion plans of CIL/SCCL,

should also be included in the list of captive blocks for allocation; In identifying captive coal blocks at reasonable distance from existing mines and

projects of CIL/SCCL, it should be considered that the distance should not be at a

disadvantage to the captive coal block developer in terms of available infrastructure

and other facilities;

Without disturbing the present procedure of coal block allotment, the future allotmentof coal blocks should be on the basis of better investigation and for which CMPDIL

and other agencies should be mobilized

State Government: The State Government and its agencies should facilitate development

of infrastructure in the mining areas, particularly in providing right of way, railway

clearances, water, electricity, etc.

Developers: The captive block developers should coordinate with other coal block

developers in proximity to jointly fund the development of Infrastructure based on a

Master Plan prepared by an independent agency.

2. Allocation of Coal block

Central Government: The Ministry of Coal should not only look into the promoterbackground and the end-use, but should also give adequate weightage to the technical &

financial capability of the applicants for timely development of the blocks. Further,

auctioning approach may be adopted for allocation of coal blocks. However, auctioning

of the block to the highest bidder may not be economically viable and adversely affectthe ultimate consumer. Thus, the following approaches, depending on the level of

information available for the coal blocks, may be adopted in taking the auctioning route

for allocation of blocks:

Production sharing formula for fully unexplored blocks ;

Maximum estimated production for partially explored blocks; &

Lowest cost of power generated from coal from fully explored captive blocks withadequate information on the mineable coal reserves.


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3. Approvals and Clearances

Central Government

Central Government should bring about the legal changes to have a single windowapproach through a nodal agency at the State Level under the department of mines,which would have representation from all the concerned departments in the State

Government. The nodal agency can pre-determine the conditions for each category ofland based on environmental sensitivity and nature of the proposed activity(prospecting, mining etc.). The nodal agency may complete the requirements of

identification of land for compensatory afforestation, enumeration of trees, cost-

benefit analysis, etc. before inviting application for mining lease.

Public-Private Partnership model can be adopted in the form of a shell companyformed for each of the captive blocks allocated. Shell companies (formed by the

Public sector) are bid out to the private sector only after obtaining clearances and landacquisition is completed.

MoEF should segregate coal bearing areas into Go and No-Go areas for each typeof lease (Reconnaisance, Prospecting, and Mining) on the basis of the forest coverand environmental & ecological sensitivity. For areas defined as Go, it may be

prudent to allow minimal or no forest & environmental clearances for investigative or

prospecting purposes, with the conditionality that cutting of trees without priorpermission is not allowed. Non-coal bearing areas can be used for rehabilitation

colonies and townships.

A concurrence by Forest Advisory Committee or the empowered committee isrequired for obtaining forest clearance. The committee then sends a report to the

Honble Supreme Court before sanction is accorded. This procedure needs to be

reviewed to reduce delays in awarding clearances.

MoEF clearances for projects which have a greater probability of commencing

operations before the Eleventh Plan should be given priority.

The Ministry of Coal as well as MoEF should grant consent to the developer of a coalblock to develop the block in 2-3 phases, so that production could start early.

State Government: State Government should adopt procedures to issue the prospectinglicense within a minimum time.

4. Land AcquisitionState Government: The procedure for land acquisition needs to be made less time

consuming as the State Governments in large number of cases own significant portion of

the land.

5. Rehabilitation of Project Affected People (PAP)

Central Government: It is recommended that the Ministry of Coal coordinate with the

State Governments to align the State R&R Policies with the National R&R Policy.


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Further, the State Governments should facilitate the developers in negotiating the

compensation package with the PAPs.

State Government: For general development and improvement in the coalfield areas, the

State Government could consider creating an Area Development Fund by applying a

levy on each tonne of coal produced. This fund could be utilized for social welfare ofPAP including their health & education, improvement of infrastructure, roads, water

supply etc.

6. Geological Investigations & Mining plan alternate agencies

Central Government: New agencies with the competence to perform geological

investigations need to be set up and accredited by the Government of India. These

agencies should be independent and unaffiliated to Coal India Limited or other publicsector coal companies. These agencies or an independent expert group should also be

empowered to review and approve the mining plan, which would be an input to Ministry

of Coal.

7. Tapering coal linkage/ marketing of surplus coal

Central Government: The timeframe for development of coal block is likely to be muchlonger than a power plant. Ministry of Coal, therefore, has decided to provide coal

linkage on a tapering basis to the power producers who have been allotted captive coal

blocks and whose mining plan has been approved. It is suggested that the Ministry of

Coal should provide for the condition that the mining lease should be approved before thepower plant commences operations.

8. Joint Allotment of Coal BlocksCentral Government: In case of joint allotment of coal blocks it has been observed that

some of the companies in the Joint Venture do not furnish the Bank Guarantee, which

hinders the development of the block. Companies in the consortium which furnish theBank Guarantee should be allowed to proceed with development of the coal block, and

the partners who fail to provide the bank guarantee should be replaced with other

companies from among the applicants whose applications are pending with the Ministry.


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Captive Coal Mining by Private Power Developers Issues and Road Ahead

The rapid growth in the Indian economy has led to a robust growth in the demand for

power. The demand for power has been constantly outpacing supply. With a view to

reducing the demand-supply gap, large generation capacity additions have been planned.

Notwithstanding efforts to have a diversified portfolio of fuel options in powergeneration, share of coal based generation has increased over the years and with large

capacity additions envisaged over next decade, coal will continue to remain the primary

source of fuel for power generation. Besides substantial coal based capacity additions,increase in demand for coal has been accentuated by improved utilization of plants,

diminishing quality of coal and inadequate availability of gas.

With rapid growth in demand for coal, coal supply is proving to be a major cause forconcern. Government of India (GoI) is targeting coal based generation capacity addition

of about 53000MW by 2012 (end of the 11th

Plan period), coal based installed capacity

would then be more than 125 GW by 20121. In this scenario, there is an apprehension that

coal companies may not be able to cater to the enhanced coal requirement due to resourceand other constraints. To augment the coal supply, Ministry of Coal, Government of India

decided to allocate captive mines to bulk users of coal, in public and private sectors, andconsequently many captive coal blocks have been allocated to power developers

2.

In May 2007, at the Parliamentary Consultative Committee meeting of the Ministry of

Coal3, it was announced that to meet the coal demand about 81 coal blocks with

geological reserves of about 20 billion tonnes have been identified for allocation to

companies, both government and private, for permissible end uses. Out of these, 41 coal

blocks, with geological reserves of about 15.7 billion tonnes, were earmarked for thepower sector. Currently, the allocation coal mining blocks to companies, other than Coal

India Ltd (CIL), is done either under the government company dispensation route

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orthrough the captive dispensation route. These blocks for power sector, have been furthercategorized in 3 separate lists on the basis of method of allocation which are,

Government Company Dispensation Route, Screening Committee5

Route and Tariff

based Bidding as per the Ministry of Power Guidelines. The details of these blocksidentified for power sector are as follows:

Method of allocation No. of blocks Total reserves

(Billion tonnes)

Government dispensation route 10 6.1

1

Power Scenario at a Glance for All India, CEA, GoI, July 2008; White Paper on Strategy for 11th

Plan,CEA & CII, August 20072 Under the provisions of the 1993 amendment to Coal Mines (Nationalisation) Act, 1973.3 81 coal blocks identified for allocation under captive END-USE, Press Release, PIB, GoI, 18th May 20074 Under the Government dispensation route, the block is allocated to a government company and this

company has the right to be used for a specific end-use such as power, steel and cement.5 A screening committee has been set up in the Ministry of Coal for screening the proposals received for

captive mining of coal & lignite. The screening committee comprises of members representing Ministry of

Coal, Ministry of Power, Ministry of Railway, Ministry of Steel, concerned State Governments, CIL,

CMPDIL, and Department of Industrial Policy & Promotion (Ministry of Industry).


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Method of allocation No. of blocks Total reserves

(Billion tonnes)

Tariff based bidding as perMinistry of Power guidelines

16 6.0

Screening committee route 15 3.6

Total 41 15.7

According to Ministry of Coal, till 31st

December 2007, 170 captive coal blocks havebeen allocated, of which 15 blocks allotted to 3 PSUs and 9 private companies have

already started producing coal. Of the 170 captive coal blocks allotted (with reserves 39.3

billion tonnes), 76 coal blocks with reserves of about 23.6 billion tonnes have beenallotted to power sector (with 24 coal blocks allotted in 2007)

6.

It may be noted that production of coal through the open cast mining of coal may not

need a lengthy lead time unlike production of coal in the case of underground mining,which involves a lengthy gestation period, particularly when the stripping ratio is high.

Given the foregoing, one may be misled into believing that coal production can startwithin a short period from the allotted coal blocks. However, this is not the case, as theallocated mines could also involve underground mining.

Discussions with the private sector and public sector coal mine allottees have revealedthat the lead time is atleast 4-6 years, on account of the initial planning, conducting

geological studies to authenticate quantum and structure of reserves, obtaining several

statutory approvals from multitude of authorities & agencies, formulating mining plan

and getting approval, land acquisition, relief and rehabilitation issues, and infrastructuredevelopment.

This note attempts to examine the problems being faced by the allottees of the captivecoal blocks and suggests recommendations which could shorten the actual lead time

involved in commercial production of coal from these coal blocks.

1. Guidelines followed for Identification of Coal Blocks for Captive Allocation

The guidelines adopted for demarcating the blocks are such that the developers wouldface a number of problems in quickly bringing the allotted blocks to the production stage.Ministry of Coal relies on Coal India Ltd (CIL) and Singareni Collieries Company Ltd

(SCCL), for identifying the captive coal blocks. The guidelines adopted by CIL & SCCL

for identifying and allotting coal blocks for captive mining are as follows7:

The blocks offered to private sector should be at reasonable distance from existing

mines and projects of CIL in order to avoid operational problems

Preferably, blocks in greenfield areas having less or no development of basicinfrastructure like road, rail link, etc. may be allotted to the public/private sector for

6 Coal Directory of India 2006-07, Part-I: Coal Statistics, Ministry of Coal, GoI7 Coal Directory of India 2006-07, Part-I: Coal Statistics, Ministry of Coal, GoI


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captive mining. The areas where CIL has already invested in creating such

infrastructure for opening new mines should not be handed over to the private

sector, except on reimbursement of costs

Blocks already identified for development by CIL where adequate funding is onhand or in sight should not be offered to the private sector

Public/private sector should be asked to bear the full cost of exploration in theseblocks which may be offered

For identifying blocks, the requirement of coal for about 30 years would beconsidered

Others, which include Mine Plan approval under the provisions of Mines and

Mineral (Development and Regulation) Act 1957, approval of the Directorate

general of Mine Safety, and inspection by Coal Controller for an appropriateenforcement of conservation measures under the provisions of the Coal Mines

(Conservation and Development) Act 1974.

The fact that the blocks are identified at a distance from the existing infrastructure of the

CIL and also that coal blocks are located in remote areas, devoid of all basicinfrastructure like road, rail links, electricity etc, it is difficult for the coal block allotteesto quickly bring the coal blocks to production stage. Development of infrastructure on a

piece meal basis i.e. individually on block by block basis may cause drain on the

resources of the developer, would not bring in economies of scale, and could be onerousas well. Further, the blocks identified are only regionally explored with inadequateinformation, which adds to risk and also reasons for delay in development of the blocks.

Thus, to facilitate speedy development of coal blocks it is recommended that thefollowing should be considered in identifying and allocating coal blocks:

If there are coal blocks in the vicinity of the CIL/SCCL blocks which are not included

in the expansion plans of CIL/SCCL, then these blocks should also be included in thelist of captive blocks for allocation and not excluded simply because of theirproximity to CIL/SCCL blocks;

In identifying captive coal blocks at reasonable distance from existing mines andprojects of CIL/SCCL, it should be considered that the distance should not be at a

disadvantage of the captive coal block developer in terms of available infrastructureand other facilities;

Without disturbing the present procedure of coal block allotment, the future allotmentof coal blocks should be on the basis of better investigation and for which CMPDIL

and other agencies should be mobilized

Further, in the context of inadequacies in infrastructure associated with the captive blocksidentified for allocation, it is recommended that the Central/State Government agenciesshould facilitate development and creation of infrastructure in the mining areas,

particularly in providing right of way, railway clearances, water, electricity, etc. The

Government could also consider pre-identification of non-coal bearing corridors to beused for rehabilitation colonies and townships.


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The captive block developers should coordinate with other coal block developers in

proximity to jointly fund the development of Infrastructure based on a Master Plan

prepared by an independent agency.

2. Allocation of Coal block

Allocation of coal block should not only look into the promoter background and the end-

use, but should give importance to the technical & financial capability of the applicants

for timely development of the blocks. The process of allocation of the block could alsotake into consideration the extent of the preparedness of the developers and the projects.

Further, auctioning approach may be adopted for allocation of coal blocks. However, it

may be noted that auctioning of the block to the highest bidder may not be economically

viable, since it would get translated into a pass through in the cost of end-use product andthereby adversely affecting the ultimate consumer.

The following approaches, depending on the level of information available for the coal

blocks, may be adopted in taking the auctioning route for allocation of blocks:

Status of block Possible criteria for allocation

Fully explored Lowest cost of power generated

Partly explored Maximum estimated production

Totally unexplored Production sharing formula

Auctioning on the basis of maximum proposed production or production sharing formula

may be workable till sufficient data on the depth, seam thickness and quantity & qualityof the coal is available for the blocks put up for auction. However, once sufficient data is

available for the blocks put up for auction, the criteria for grant of block could be linked

to the lowest cost of power generated from captive coal block.

3. Approvals and Clearances

In the present legislative and regulatory framework, the allottee of a captive coal blockhas to obtain multitude of clearances and approvals as provided under the provisions of

the Coal Mines (Nationalisation) Act, Colliery Control Rule 2004, Coal Mines

(Conservation and Development) Act 1974 and rules thereunder, Mines and Mineral

(Development and Regulation) Act 1957 (MMDR), Mineral Concession Rules 1960(MCR), Environment Protection Act with its rules and procedures, and Forest

Conservation Act with its rules and procedures.

In the federal structure of India, the State Government is the owner of the minerals

located within the boundaries of the State. Thus, though the Central Government

allocates the coal blocks for captive mining, the State Government grants theReconnaissance Permit (RP), Prospecting Licence and Mining Lease under the provisions


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of the MMDR Act and Mineral Concession Rules. However, the State Government can

grant the mining lease only with the prior approval of the Central Government as

provided under section 5(1) of the MMDR Act. Central Government approves theapplication only after the coal block allottee obtains the mining plan approval and obtains

clearances from several authorities at the Central, State and District level.

Although broadly three clearances are required, i.e. Grant of RP or ML, Environmental

Clearance and Forest Clearance, but depending on whether the allotted block is explored

or unexplored, in forest or non-forest area, etc. clearances may be required from multipleauthorities. The table below indicates the authorities and agencies at the Central and State

level from whom the approvals have to be sought by the coal block allottees before actual

production can begin:

Approvals / Clearances Authority / Agency Involved

Mining Lease

Approval or Purchase of Geological Report CMPDIL (purchase could also be from

SCCL, MECL)Directorate General of Civil Aviation andMinistry of Defence (for unexplored blocks

if aerial reconnaissance is conceived)

Mine Plan CMPDIL

Coal Controller

Mine Safety Directorate General of Mine Safety

Mining Technology & Conservation

Measures, and Coal Categorisation

Coal Controller (under the provisions of

Colliery Control Rules and the Coal Mines

(Conservation & Development) Act)

Mining Lease State Government (Mining Department),

Ministry of Coal (GoI) Reviewed atvarious levels within the Departments at

the State & Central Government level

Environment

EIA / EMP Studies State Pollution Control BoardState Environmental Impact Assessment

Authority

State Water Resource and Water SupplyDepartment

District Administration (for various aspects

of site clearance)

Coal ControllerDepartment of Environment (MoEF)

Forest

Forest Clearance &

Valuing Compensatory Afforestation

Committee to Advise GoI (MoEF)

Office of Chief Conservation of Forests,

(Regional Office of MoEF)State Forest Department & District


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AuthorityDepartment of Forest (MoEF)

State Revenue Department

Honble Supreme Court

Land Acquisition Ministry of Coal (under provisions ofCBA)

State Department of Revenue

Infrastructure (Electricity, Water,

Railways, Road, etc)

Appropriate Departments of the State

Government & Ministries of Central

Government

It may be noted that of all the clearances, the MoEF clearance is the most timeconsuming, since many departments and issues are involved in getting environmental

clearances and also vast majority of the coal blocks are situated on forest land. Even

geological investigations (which require drilling for exploration) in these areas require

MoEF approval. This approval is a lengthy process and takes a lot of time.

The Guidelines for Allocation of Captive Blocks & Conditions of Allotment through the

Screening Committee, Ministry of Coal, provides for the normative time limit ceilings(Appendix 1) to ensure that coal production from the allocated captive blocks commence

production within 36 months (42 months in case the area is in forest land) of the date of

issue of letter of allocation in Open Cast (OC) mine and in 48 months (54 months incase the area fall under forest land) from the date of said letter in Under Ground (UG)

mines. The following chart (drawing upon the ceiling time limit provided in the

Guideline) is an indicative depiction of the schedule of commencement of miningoperations from the time the coal block is allocated:


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The Guideline of MoC, mentioned above, is to ensure timely development and operationof the allocated captive blocks. In order that the allottee adheres to the timeline, the

allottee has to provide a bank guarantee and the encashment of the bank guarantee isdependent on achievement of the milestones consistent with the normative time limit

ceilings.

Time limits are specified in the Mineral Concession Rules and other legislations formaximum time permissible for grant of approval on an application. This is based on the

time to be taken from the receipt of completed application. Since basic information

required for processing the application is available at the district level, particularly forforest clearance, unless and until all such information is available, the application is

considered incomplete. The time taken at various levels of scrutiny delays the process.Thus, in view of the large number of approvals required, it is unlikely that the timelinespecified by MoC for development of coal block would be adhered to by the coal block

allottees. The existing provisions of the Acts do not provide for deemed approval status

to applications if the time lines are not adhered to and thus there is no urgency indisposing the applications within the specified time.


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From the above, the following limitations are thus evident in the process of grant of

clearances and approvals, which would cause significant delay in production from the

allotted captive blocks:

Several parallel clearance & approval processes are to be pursued at the Central

Government and State Government level, and the allottee has to follow-up thewith the applications with various authorities.

Environment and Forest clearance is extremely time consuming and significantdelays arise in the public consultation process, valuation of compensatory

afforestation, identification of non-forest land for compensatory afforestation,

enumeration of trees and completion of cost-benefit analysis by the forestdepartments.

The entire process of seeking approvals lack clarity, and often delays in oneprocess causes delay in the others. Besides, conditions of Mining Lease are not

standardized and could be significantly influenced by individual judgment of thegranting authorities.

A comparative study on grant of mining lease in Australia, Canada and India, included inthe Report of the Expert Group constituted by the Ministry of Steel for formulating

Guidelines for Preferential Grant of Mining Leases (2005), suggests that the time taken

for grant of mining lease in Australia is about 1-2 years (12 + months) and in Canadaabout 2-3 years (12-36 months) as compared to 7-8 years in India (though the Mineral

Concession Rule8provides that the State Government shall dispose off the application for

grant of mining lease within 12 months from the date of receipt of application). The

observations of the study are listed in the following table:

Australia Canada India

State is fully empowered togrant mining lease

State is fully empowered togrant mining permit (MP)

State to grant mining lease withthe approval of the Central

Government

Single window process,

involving 4 agencies:

Department of Minerals &Energy

Department of Environment

National Native TitleTribunal

Land Acquisition Authority

in Local Government

Minister of Minerals and

Single window process,

involving 3 government

agencies:

Department of NaturalResource

Department of Environment

Department of Labour

Approvals are required from

multitude of authorities at the

Central, State and Districtlevels, with the different

authorities having little or no

coordination amongst them.Broadly 3 different clearances

requiring submission of separate

applications:

(1)Approval of Grant of ML

8 Mineral Concession (Amendment) Rules 20029 The Mining proposal approval process and minimum timeframes of process as provided in the Regulatory

Guideline No.1 of the Division of Minerals and Energy Resources, Government of South Australia, June

2007 are presented in Appendix 2 of this note. The regulations laid down by the Department of Industry

& Resources, Government of Western Australia are similar.


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Energy is the final approvingauthority, and takes decisions in

consultation with other

Ministries. Close interaction

between Department of

Minerals and Energy andagencies responsible for

protection of environment.

(2) Forest Clearance(3) Environmental Clearance

Central Government grants

forest and environmental

clearances on therecommendations of the state

Government.

Mining Lease: Time taken forgrant of mining lease is 1-2

years. Time taken for activities

involved are fixed & largelyadhered to, except in cases

where public consultation

process & stakeholder

participation is involved.

Applicants submit application

for grant of lease with theMining Registrar in the

Department of Minerals &

Energy.

Mining Lease: The time takenfor grant of MP is 2-3 years.

Fixed time frames are complied

with.

The project can be rejected if

there are strong chances of

adverse socio-economic andenvironmental impacts.

Mining Lease: Although timeframe for clearances &

approvals are specified as less

than an year in the various rules,the actual time taken are usually

7-8 years for grant of ML.

Identification of non-forest landfor compensatory aforestation

takes long time and at times

takes more than a decade.

Requirement of enumeration of

trees, cost benefit analysiscarried by the State Forest

department is time consuming

(10-12 months)

Mining areas are categorized asper environmental sensitivity.

Conditions & procedures for

each category are predeterminedand identified in each case.

Grant of mining leases in very

sensitive areas require approval

from both houses of Parliament.

The project is first assessedfrom Environment angle, before

processing for Mining Permit

(MP). Once the project getsclearance from environment

angle, the proponent makes an

application for MP.

-

Applicant is required to submit

a Bond to take care of

environmental andrehabilitation considerations.

Department of Natural Resource

requires a bond or security to

ensure that reclamation work iscarried out.

-

Financial & technical strengthof the applicant are taken into

consideration before grant of

mining lease.

Info not available Limited emphasis being givenon the technical and financial

strength of the applicant.

Minimum term of mining lease

is granted for 21 years.

The minimum term of Mining

Permit is 20 years.

Mining lease is granted for 20-

30 years


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Based on the above observations and discussions, the following suggestions may be

considered to speed up the approval process and grant of mining lease:

A single window approach through nodal agency set up at the State level under the

department of mines with representation from all the concerned departments ofvarious ministries. The nodal agency can pre-determine the conditions for eachcategory of land based on environmental sensitivity and the nature of the proposed

activity (prospecting, mining etc.). The nodal agency may complete the requirements

of identification of land for compensatory afforestation, enumeration of trees, cost-benefit analysis, etc. before inviting application for ML.

Since a single window approach may require change in legal procedure, alternately aPublic-Private Partnership model can be adopted in the form of a shell company

formed for each of the captive blocks allocated, as has been done in the case of

UMPPs in Power Sector wherein in shell companies (formed by the Public sector) are

bid out to the private sector only after obtaining clearances and land acquisitionprocess completed.

As an immediate remedial measure, MoEF should map and segregate the entire coalbearing areas into Go and No-Go areas for each type of lease (Reconnaisance,Prospecting, and Mining) on the basis of the forest cover and environmental &

ecological sensitivity. The GoI/Ministry of Coal (MoC) by not allotting the blocks

under the No-Go areas would prevent wastage of resource and also speed up theapproval process for grant of lease. Thus, for areas defined as Go, it may be prudent

to allow minimal or no forest & environmental clearances for investigative or

prospecting purposes, with the conditionality that cutting of trees without prior

permission is not allowed. Thus, although the need for detailed environmental impactstudies, assessment of compensatory afforestation & enumeration of trees and cost-

benefit analysis for forest clearance is required for mining approval, the same level ofdetail may not be required for limited drilling involved in prospecting or investigative

purposes.

Forest clearance is a contentious issue and has been further compounded by thedevelopment which requires each case of forest clearance a concurrence by Forest

Advisory Committee or the empowered committee, which has to then send a report to

the Honble Supreme Court before sanction is accorded. This procedure needs to be

reviewed and the empowered Advisory Group or the empowered committee & MoEF

could be delegated authority to accord approval in certain defined categories of forestareas.

MoEF clearances for projects which have a greater probability of commencingoperations before the Eleventh Plan should be given priority.

The approval for the prospecting license by the state government should be issued asthe foremost requirement within a minimum time. The developer could then develop


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the coal block in 2-3 phases, i.e. identify comparatively easier areas within these

blocks (keeping in view government/private land, forest/non-forest land etc.) and get

the required investigations, mining plan, approach etc. for the first phase so thatproduction could start early, and simultaneously also repeat the cycle of activities in

the subsequent phases. This approach will require due consideration and consents by

Ministry of Coal as well as Ministry of Environment and Forest.

4. Land Acquisition

Unlike other industries siting of a coal mine does not leave room for choice in the land to

be acquired. Land has to be acquired where coal exists, irrespective of population base or

existence/ density of forest land. The present procedure on land acquisition is lengthy and

is prone to litigation. In a large number of cases, a large part of the land belongs to thegovernment, and in such cases the Government should take measures to transfer the land

to the developers in a shorter timeframe.

5. Rehabilitation of Project Affected People

As regards Rehabilitation of Project Affected People (PAP) there are many prevalentResettlement & Rehabilitation (R&R) policies. The Central Government has a National

R&R policy 2007, which provides for the State Governments to have their own policies.

States in proposing their R & R policies to the benefit of the PAPs are more stringent on

the project developers. Also providing employment to all PAP may not always bepossible as new technology driven mining methods is less labour intensive.

It is recommended that the Ministry of Coal should coordinate with the StateGovernments to align the State R&R Policies with the National R&R Policy. Further, the

State Governments should facilitate the developers in negotiating the compensation

package with the PAPs.

For general development and improvement in the coalfield areas, the State Government

could consider creating an Area Development Fund by applying a levy on each tonne

of coal produced. This fund could be utilized for social welfare of PAP including theirhealth & education, improvement of infrastructure, roads, water supply etc.

6. Geological Investigations & Mining plan alternate agencies

In most coal blocks allocated to companies, detailed geological investigations have not

been done. At present, exploration for coal in India is carried out by Geological Survey ofIndia (GSI), Mineral Exploration Corporation Ltd (MECL), Singareni Collieries

Company Ltd (SCCL), Directorates of Mines and Geology of some states. These

agencies have limited capacity for drilling of areas (for collating data) and, currently, arealready fully stretched. Out of 22,400 km

2of the coal bearing sedimentary formations

identified by GSI, only about 10,200 km2, or only 45% of the total area, has been

systematically explored through regional and promotional drilling.


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Apart from geological investigations, in the present legislative framework the Mining

Plan is approved by Ministry of Coal (with technical inputs from CMPDIL). This further

delays the whole process.

Thus, new agencies with the competence to perform geological investigations need to be

set up and accredited by the Government of India. These agencies should be independentand unaffiliated to Coal India Limited or other public sector coal companies. These

agencies or an independent expert group should also be empowered to review and

approve the mining plan, which would be an input to Ministry of Coal.

7. Tapering coal linkage/ marketing of surplus coal

The timeframe for development of coal block is likely to be much longer than a powerplant in view of the various problems faced by the developers. Therefore, there is a risk

that the power plant would be commissioned prior to the commercial operations date of

the coal mine. In order to mitigate this risk of delay in the commercial operations of the

coal mine, Ministry of Coal has decided to provide coal linkage on a tapering basis to thepower producers who have been allotted coal blocks for captive use. The tapering linkage

is being considered by the Ministry of Coal to facilitate the working of end-use plants incase of development of coal blocks allocated to such consumers does not synchronize

with the operation of end-use plant. In this regard, MoC, in December 07, came out with

a Guideline relating to issue of LoA/allocation of coal on Tapering Basis to various

consumers. However, the application for such tapering linkage would only be consideredif the applicant has an approved mining plan for the coal block allocated.

This is tricky and most of the captive block owners are unlikely to qualify for taperinglinkage even if their end-use plant is in an advanced stage of development. The Ministry

of Coal should consider reviewing this condition for grant of tapering linkage to facilitate

rapid capacity addition in power (considering the huge deficit situation in power andsustenance of economic growth), and should consider granting tapering linkage based on

technical & financial capability of the developer and preparedness of the end-use project.

Instead of keeping approved mining lease as criteria for considering the application of

tapering linkage, the Ministry of Coal should provide for the condition that the mininglease should be approved before the power plant commences operations.

8. Joint Allotment of Coal Blocks

In some cases a coal block has been allotted to a number of companies and the allottees

are required to submit Bank Guarantees to safeguard commercial obligations and ensuretimely development of the allotted coal blocks. If some partner companies of the

proposed Joint Venture do not furnish the Bank Guarantee, then the development of the

mine and of the associated power plant with the mine is held up.

It is recommended that if in the consortium of companies granted a coal block, one or

some of the partners are not serious, but the remaining partners are serious, then the

progress of the development of the block by the consortium should not be jeorpardised.


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Thus, companies in the consortium who furnish the Bank Guarantee should be allowed to

proceed with development of the coal block, and the partners who fail to provide the bank

guarantee should be replaced with other companies from among the applicants whoseapplications are pending with the Ministry. However, pending the replacement of

partners, the development of the coal block should proceed as usual. In this regard, the

company allocated the coal block, having the requisite financial strength, could also begiven the freedom to choose partners from among the applicants whose applications are

pending with the Ministry.

9. Infrastructure status for Coal industry

Coal industry needs to be given infrastructure status so as to attract more players into this

industry and to incentivise domestic production of mining equipment. The infrastructurestatus could be for both coal mining and coal washeries. Infrastructure status for the coal

sector would bring it to par with other sectors such as roads, railways, oil and laying of

oil and gas pipelines.

In the past, this proposal was rejected as bulk of the coal mining was under the public

sector. Coal mining, however, is expected to undergo a major change in the coming yearswith production from captive coal blocks mainly by private sector companies. The main

beneficiaries would be power companies as concessions would make coal production

economical that would ultimately help in keeping power tariffs low. Coal companies

would be also able to import capital equipment and spares at concessional rates.


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Appendices

Appendix 1: Normative Time Limit Ceilings as provided in Guidelines for

Allocation of Captive Blocks & Conditions of Allotment through the Screening

Committee, Ministry of Coal

Sno. EVENT TIME LIMIT

in months from '0' date

1 Allocation 0

2 Purchase of GR 1.5

3 Bank Guarantee 3

4 Mining Lease Application 3

5 Mining Plan submission 6

6 Mining Plan approval 8

7 Previous approval application 11

8 Previous approval 11

9 Forest Clearance application 12

10 Forest Clearance 18

11 Environment Clearance Application 12

12 Environment Clearance 18

13 Mining Lease grant 24

14 Land acquisition begin 9, 19

15 Land Acquisition 30, 36

16 Opening permission application 34, 40 for OC

17 Opening permission grant 35, 41 for OC

18 Production 36, 42 for OC

48, 54 for UG


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Appendix 2: (a) Flowchart of mining proposal approval process

Source: Mining Approvals in South Australia, Regulatory Guideline No.1 of theDivision of Minerals and Energy Resources, Government of South Australia, June 2007


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Note: PIRSA - Department of Primary Industries and Resources; TRC - Tenement

Review Committee - PIRSA independent peer review committee for lease application

assessments; DAC - Development Assessment Commission; EIC - Extractive IndustriesCommittee - a Subcommittee of DAC; EPA - Environment Protection Authority; MARP

- Mining and Rehabilitation Program; SEB - Significant environmental benefit (offset for

native vegetation clearance)


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Appendix 2(b) Minimum Timeframe of Process


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Source: Mining Approvals in South Australia, Regulatory Guideline No.1 of the

Division of Minerals and Energy Resources, Government of South Australia, June 2007

captive coal mining final

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