India approves new policy to sell coal on open market

20 February 2019 (Last Updated February 20th, 2019 11:37)

The Indian Cabinet Committee on Economic Affairs has approved a policy that will allow coal mine owners to sell 25% of their mined material on the open market.

India approves new policy to sell coal on open market
The new policy is aimed at addressing a tepid response to captive coal mine auctions. Credit: Nitin Kirloskar.

The Indian Cabinet Committee on Economic Affairs has approved a policy that will allow coal mine owners to sell 25% of their mined material on the open market.

At present, the allocatee of coal mines for specified end use or own consumption, known as captive coal mines, are not permitted to sell coal in open market.

The latest policy is aimed at increasing competitiveness and addressing a tepid response to captive coal mine auctions, thereby leading to higher revenue for the government.

The new approach aims to make the country’s coal reserves more commercially attractive, and increase profits for coal miners.

Coal mines will be allowed to sell their output on ROM basis in the open market by making additional premium payment on such sale under the Coal Mines (Special Provisions) Act, 2015 and the Mines and Minerals (Development and Regulation) Act, 1957.

Under the new policy, the coal mine owners are mandated to use a minimum of 75% of its actual production (ROM basis) in specified end-use plants, in case of captive coal mines.

“The latest policy is aimed at increasing competitiveness and addressing a tepid response to captive coal mine auctions.”

If it is an auction, the successful bidder will have to pay an additional premium of 15% of its final bid price on per tonne basis, for the actual quantity of coal sold in open market.

The successful allottee should pay an additional reserve price of 15% of the reserve price in case of allotments.

The latest policy, which aims to address the issue of lack of response from the bidders during the earlier tranches of auction/allotment, will give flexibility to allocattee in cases of change in the economic situation, business cycle or end use plant requirement.