The Indian government is considering giving a 50% exemption in revenue sharing with states and reduced bank guarantees to push underground mining, said two people aware of the development, amid growing demand from the power sector. The move is based on the recommendations made by a committee set up by the ministry to suggest policy measures for to promote underground coal mining. Discussions are underway and a decision has not yet been made, the people said.
“Measures like 50% exemption in revenue sharing, which companies share with states and a lower amount for bank guarantees are being considered currently,” said one of the two persons. Coal mining companies need to give a percentage of their revenue every month to states—a key parameters in bids for commercial mines with 4% revenue share kept as the base.
The second sop involves performance bank guarantees—needed to receive loans. As per tender documents, the PBG submitted for each auctioned coal mine is to be revised annually based on the National Coal Index (NCI) for the month of April in the beginning of the year. However, earlier this year, the coal ministry relaxed the norms and decided that the first revision of the bank guarantee would be done upon the grant of permission for opening the mine.
“The intention behind lowering the bank guarantee is that as several new players have been entering coal mining, their capital should not be held up and they can increase their investment,” said the other person.
This person said the recommendations are being considered as part of an overall policy framework for underground coal mining, which is seen to be environmentally less harmful than opencast mining. Responding to a mailed query, the ministry of coal said no decision has been taken on exemption in revenue sharing and lowering of bank guarantees. “No such decision to provide exemption in revenue share and to reduce bank guarantee for players going for underground mining has been taken by MoC,” the ministry said.
Recently, coal secretary Amrit Lal Meena said the government will soon come up with a policy framework for underground coal mining. He reiterated the government’s target to increase production from underground coal mines to 100 million tonnes by the end of this decade from the current 26 million tonnes per year.
“Such mines have already been identified. We had constituted a high level committee to promote to suggest policy measures to promote underground mining. The committee has submitted its report, the recommendations of the committee are with the ministry. They are under different discussion stage and we will shortly come out with suitable policy framework,” Meena said
The environmental impact of underground coal mines is thought to be lower compared to open cast mines as large-scale deforestation is not required and displacement of people too is significantly less, said Meena. In June this year, coal minister Pralhad Joshi said the country needs to move away from opencast to underground mining as he unveiled a vision plan for state-run Coal India Ltd to boost underground mining.
As per the road map, Coal India expects coal from underground mines to be around 31-34 million tonnes in FY24, rising to 99-100 million tonnes in FY28. Currently, the share of coal from underground mining is around 4% of the country’s total coal production and the government is looking at taking it to 10% by 2030.
On 26 September, Mint reported that the coal ministry is seeking easier and faster environmental clearance for underground coal mines and the ministry will push for fewer compliance requirements for underground coal mine approvals on the grounds that these mines have a lower environmental impact compared to opencast mines.
The move comes amid a national transition to green energy and government’s ambitious target of installing 500 GW of power capacity from non-fossil sources by 2030. In the wake of rising power demand, along with the push for renewable energy, government is now turning towards coal to meet this surging demand. Earlier this month, union power minist RK Singh said that India would add around 12 gigawatts of coal-based power generation capacity in the current fiscal year to meet the sustained growth in power demand. By 2032, Centre plans to add a total of 75 GW thermal power capacity.
Despite being the second largest coal producer in the world and having the fourth largest reserves of coal gobally, India is an importer of coal given the high demand from power, logistical issues and low calorific value of the domestic coal. Last week the, the union minister for coal, Pralhad Joshi said that efforts are underway to stop coal import by FY26.
In FY23, India total coal production in FY23 was 893.08 million tonnes and the government has set a target of 1 billion tonnes for this fiscal year.
