Coal is the most important fossil fuel in India and accounts for approximately 55% of India’s energy needs. Coal has contributed significantly to India’s industrial heritage ever since the introduction of steam locomotives in 1853, and continues to do so, due to India’s ever increasing energy consumption and needs. Through a sustained programme of investment and greater thrust on application of modern technologies, it has been possible to raise the production of coal from about 70 million tonnes at the time of nationalisation in the early 1970’s to about 478.18 million tonnes in 2007. It is envisaged that India’s current coal production of over 450 million tonnes would go over 600 million tonnes by 2012, requiring an investment outlay of upto approximately $15 billion.
Coal mining was brought under the public sector between 1971- 1973 with the passing of the Coal Mines (Nationalisation) Act, 1973. Nationalisation was done in 2 phases; the first with coking coal mines (by The Coking Coal Mines (Nationalisation) Act, 1972, under which coking coal mines and coke oven plants other than those with the Tata Iron & Steel Company Limited and Indian Iron & Steel Company Limited, were nationalised in May, 1972) and then with non-coking coal mines in 1973, with the enactment of the Coal Mines (Nationalisation) Act, 1973 (hereafter the “1973 Act”), which continues to be the Central legislation determining the eligibility of coal mining in India. The 1973 Act categorically states that “no person, other than the central government or a government company or a corporation owned, managed or controlled by the Central Government shall carry on coal mining operation in India, in any form.”
India’s Coal Reserves
As a result of exploration carried out up to the depth of 1,200m, as on April 1 2009, India has estimated hard coal reserves of around 267.21 billion tonnes – one of the richest in the world, of which 105.82 billion tonnes are proven.
The Ministry of Coal has the overall responsibility of determining policies and strategies in respect of exploration and development of coal and lignite reserves and sanctioning of important projects. These key functions are exercised through its public sector undertakings, namely, Coal India Limited (“CIL“) and Neyveli Lignite Corporation Limited (“NLC“) and Singareni Collieries Company Limited (“SSCL“).
Coal India Limited
The Coal Mines Authority Ltd. (“CMAL“) was set up in 1973 to operate the nationalised non-coking coal mines. In September 1975, the nationalised coal industry was restructured with Silencil the establishment of CIL. CIL now has eight subsidiary companies. At present, with its monopolistic position, CIL accounts for 85% of coal production, followed by SCCL (8.5%), and captive producers (6.5%).
Private Sector Investment
The 1973 Act was amended in 1976 terminating all mining leases on coal held by private lessees to allow (a) captive mining by private companies engaged in the production of iron and steel, and (b) sub-leasing to private parties of isolated small pockets not amenable to economic development and not requiring rail transport.
In 1993, the 1973 Act was further amended to allow captive coal mining in the private sector for power generation, washing of coal obtained from a mine and such other end uses as notified by the Central Government from time to time. Coal gasification and coal liquefaction have also been notified as specified end uses.
In March 1996, the Central Government allowed captive mining of coal for production of cement. The restriction of captive mining does not apply to state-owned coal mineral development undertakings. Commercial coal sales can legally only be undertaken by and through public sector coal companies (and their subsidiaries) and coal produced from captive mines by the private sector cannot be sold on the open market.
In February 1997, the cabinet approved a proposal to amend the 1973 Act to allow non-captive coal mining, which met with stiff opposition from trade unions, who expressed concerns that pre-nationalization ills like unscientific mining practices, environmental degradation and labour exploitation, would re-occur. Due to this, it took at least three years for the Bill to be re-formulated after taking care of the concerns of the trade unions, and it was introduced in Parliament in 2000. The Bill is, however, yet to be passed.