As part of India’s strategy to revive economic activity, the Cabinet Committee on Economic Affairs (CCEA) approved a new auction process for awarding coal and lignite blocks on a revenue-sharing basis. Earlier, blocks were awarded on a fixed payment per tonne basis, which the government believed was impeding production.
The new strategy was articulated by India’s finance minister Nirmala Sitharaman while announcing that India will further open up commercial coal mining with a revenue share arrangement to boost domestic production. The announcement was part of the fourth tranche of the ₹21 trillion stimulus package to mitigate the economic fallout of the novel coronavirus pandemic.
“A paradigm shift in the approach from being oriented to maximum revenue from coal to making maximum coal available in the market at the earliest,” the government said in a statement. Despite having the world’s fourth-largest coal reserves, India imports around 235 million tonnes (mt) of coal, of which around 135 mt valued at ₹1,71,000 crore could have been met from domestic reserves, coal and mines.
“The bidders would be required to bid for a percentage share of revenue payable to the government. The floor price shall be 4% of the revenue share. Bids would be accepted in multiples of 0.5% of the revenue share until the percentage (%) of revenue share is up to 10%, and thereafter bids would be accepted in multiples of 0.25% of the revenue share. There shall be no restriction on the sale and/or utilization of coal from the coal mine,” the statement said.
“The methodology is oriented to make maximum coal available in the market at the earliest and it also enables adequate competition, which will allow discovery of market prices for the blocks and faster development of coal blocks,” the statement said.
The CCEA also permitted commercial exploitation of coal bed methane (CBM) in the mining lease area, which will help India’s natural gas production and reduce the demand-supply gap in the country. The CCEA incentivized early production by granting rebates in revenue share payments.
