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Coal Reforms
Context:
The Centre is preparing to launch ‘Coal Reforms 3.0’, aimed at reducing overall coal imports and increasing the availability of coal for industrial sectors.
More on News:
- Following coal nationalisation in 1971 and the introduction of the e-bidding regime in 2015, the ministry views this as the third wave of reform, targeting the non-power sector, especially the steel industry.
- India is the second-largest producer of crude steel globally, and its steel mills require significant quantities of coking coal to meet domestic demand.
About Coal Reforms 3.0:
- Plans to unlock the domestic production of coking coal through a new forward bidding auction process.
- Forward bidding:
- Forward bidding is a method of coal mine allocation where coal blocks are put up for bidding by various companies.
- The bidding process involves companies submitting their bids for the coal blocks, and the highest bidder is awarded the coal block.
- This method is used to allocate coal blocks for commercial mining, where the coal is sold to companies for use in their operations.
- Forward bidding:
- Targeting zero coal imports in the next two financial years.
- Aims to provide coal to non-power sector.
- Non-power sector consumers of coal such as aluminium, steel and cement producers.
- These non-power sector faces the issue of low coal supplies from Coal India Ltd (CIL) as a result of the Central government’s move to prioritise supply for thermal power plants during shortage of coal.
- Removing end use restrictions for auction Participants.
About Coal Reforms 1.0:
- Nationalisation of the coal sector in 1973 through The Coal Mines (Nationalisation) Act, of 1973 with Coal India Limited (CIL) becoming the dominant player.
- Reasons for Nationalisation:
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- To ensure a scientific approach to the exploration and exploitation of coal deposits with due attention to safety, conservation and environmental aspects.
- Accelerating the production level through substantial investment so as to reduce India’s dependence on oil.
- Recognizing the importance of coal, a primary source of energy in the national economy and the massive investment needed to meet the huge demand.
About Coal Reforms 2.0:
- Enactment of the Coal Mines Special Provisions Act, 2015:
- It reformed the coal mining sector in India by introducing the transparent auction process, encouraged Private participation, generated revenue for the government, creating employment opportunities.
- Amendments to the Mines and Minerals (Development and Regulation) Act:
- To enhance transparency and efficiency in the allocation of mining licenses.
- Launch of Commercial coal mining auctions in 2020, allowing private sector participation.
- Commercial coal mining auctions were launched marking the entry of private players into the coal sector.
- This move attracted investments, spurred competition, and led to increased efficiency and faster project implementation.
- Approval of a single e-auction window for coal sales by coal companies.
- It will cater to all the Sectors viz. Power & Non-Regulated Sector including traders.
- It would enable the coal companies to sell coal through the market discovered price mechanism and thus, implementing this policy will lead to the removal of Market distortions.
- Amendments to the New Coal Distribution Policy (NCDP) to allow the sale of coal from closed/abandoned/discontinued mines.
- Allowing 100% FDI in coal mining to attract global expertise and advanced technologies.
- Introduction of the Coal Mines Surveillance and Management System (CMSMS) and the Khanan Prahari app to enhance security and transparency in coal mining.
- Khanan Prahari empowers citizens to report illegal mining, while CMSMS aids tracking and analysis, fostering transparency and coordination.
