Lok Sabha passes Coal Mines Bill  IndiaNivesh

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Lok Sabha passes Coal Mines Bill
 Lok sabha passed the Coal Mines (special provision) Bill, 2014, taking the
government a step closer to auctioning the 204 mining blocks cancelled by
the Supreme Court in September 2014.
 The government has promulgated a Special Ordinance for re-allocating the
coal blocks which were cancelled by the Supreme Court in September this
year, citing their allocation as illegal. The ordinance will not convert into bill.
 By opening up the sector, the ordinance allows for commercial mining in the
country apart from re-allocating cancelled 72 operational coal mines for end
usage to power, steel and cement sector by February 2015.
 The Bill provides for allocation of coal mines and vesting of the right, title and
interest in and over the land and mine infrastructure, together with mining
leases, to successful bidders and allottee through a transparent bidding
process.
 On the expiry of the term of any lease or licence, it shall be renewed, by the
State Government, in consultation with the Central Government for the
maximum period for which such lease or licence can be renewed under the
Mineral Concession Rules, 1960.
 The Central Government may allot a Schedule I coal mine to a Government
company or corporation which is not a joint venture with private company or
to a company which has been awarded a power project on the basis of
competitive bids for tariff (including Ultra Mega Power Projects).
Our take
 This will ensure continuity in coal mining operations and production of coal.
The bill prescribes the conditions to rationalize the coal sector for mining
operations, consumption and sale. In order to bridge the demand supply gap
for coal in the current scenario it looks pretty imminent that the government
has introduced e auction for allocation of coal block to private players to ramp
up the production of coal. The new move is likely to help in faster development
of coal blocks that will lead to ramp up of coal production in the country.
 Government has categorized coal blocks in 3 categories (Schedule I, II and III)
based on the operating status (Sch II- producing blocks; Sch III- upcoming
blocks in 2 years; Sch I all the de-allocated blocks). The bidding process will
be open to all companies incorporated in India. End use plant (for Power,
Steel, Iron, cement or coal washing) is a prerequisite for bidders interested in
Schedule II and III blocks (essentially all blocks with high operational visibility).
In addition coal block owners are allowed to use the mine for any of its specific
end use plants, which is positive for the companies which plants are located
in different parts of the country.
 Government companies will be allocated coal blocks on nomination basis but
the firms will not be allowed to form JVs with Private sector. So this is a positive
for NTPC
 The ordinance has given clear guidelines on compensation for land (book
value with simple interest of 12% pa) and mine infrastructure (written down
value) for prior allottee (in case the firm doesn’t get allocation). We believe,
while this compensation will not be a deterring factor for bidders, the prior
allottee will have a benefit of favorable logistics (for off-take of coal to end
use plant) while bidding for the block.
 Coal intensive industries would be happy with the move as it would create a
level playing field for all the players. Industry opines that the move will limit
the monopoly of government companies over mining resources and also help
discover the true prices of crucial natural resources of the country. Within
Power space Tata Power, Adani Power and RPower would be key beneficiary
of this move whereas within the Metal space JSPL could be the key
beneficiaries.