Transforming India’s Coal Landscape: The Coal Mines (Special Provisions) Act, 2015

The Coal Mines (Special Provisions) Act, 2015, is a landmark legislative framework in India that was enacted to address longstanding issues within the country’s coal mining sector. Prior to its implementation, the sector faced challenges related to coal block allocations, discretionary practices, and a lack of transparency. The act introduced a comprehensive set of reforms to promote fairness, efficiency, and accountability in coal mining activities.

The key provisions of the act include the transition from discretionary allocation to a competitive bidding process for coal block allocation, opening up the sector to private sector participation, revenue sharing with state governments, and stringent end-use restrictions to ensure that coal is used for its designated purposes. These reforms were essential for fully utilising India’s coal reserves, supporting economic growth, and reducing dependency on coal imports. The act emphasised transparency and accountability, marking a shift in the governance of India’s coal resources.

The Coal Mines (Special Provisions) Act, 2015

What is the Coal Mines Act?

The Coal Mines (Special Provisions) Act, 2015 is a legislative measure that is focused on the allocation of coal mines. The Act entails the transfer of the rights, ownership, and infrastructure associated with these mines, including mining leases, to successful bidders. The primary objective is to maintain uninterrupted coal mining activities and sustain coal production.

Salient features of the Act

Objective

The primary goal of this legislation is to authorise the government to allocate coal mines through competitive bidding, ensuring the uninterrupted operation of coal mining, and promoting the efficient utilisation of coal resources.

Schedule-I, II, and III Mines

Under this law, the 214 mines whose allocations were revoked by the Supreme Court fall into different categories. These mines are collectively referred to as ‘Schedule-I coal mines’. Among them, the 42 mines that were already in production or ready for production were designated as ‘Schedule-II coal mines’. The remaining 32 coal mines, which were at various stages of development, were categorised as ‘Schedule-III coal mines’. The Central Government can reclassify these mines from Schedule I to Schedule III as needed.

Participation in the auction is open to all without any limitations on intended use

A feature of this legislation is that there are no restrictions on the intended end use when participating in auctions, except for Schedule II and III coal mines. In the case of Schedule II and III mines, auctions are limited to specific end-use sectors, including power, steel, and cement.

Nominated Authority

To oversee the auction, allocation, and transfer of all rights and interests in these coal mines to successful bidders, the act empowers the Central Government to appoint a Nominated Authority, typically an individual holding the rank of joint secretary. The Nominated Authority is supported by experts and other officials in performing these functions.

Proceeds of Auction

The revenue generated from the auctions is collected by the Nominated Authority and subsequently distributed to the respective states. Stakeholders who were previously allocated coal mines before their allotments were cancelled are to receive compensation for the land and permanent infrastructure they had developed prior to the cancellation of their allotments. To oversee the disbursement of these payments, a ‘Commissioner of Payments’ is appointed.

Other provisions

Granting the central government the authority to designate custodians responsible for the operation and management of the coal mines until they are assigned through the auction process. Incorporating measures for the rehabilitation and compensation of individuals or communities who may be displaced as a result of coal mining activities or related developments. Establishing that any disputes arising from the legislation is resolved through an adjudication by the Tribunal constituted under the Coal Bearing Areas (Acquisition and Development) Act, 1957.

Coal in India

Coal is the primary energy source in India and is commonly referred to as ‘Black Gold’, given its sedimentary rock origin. The formation of coal is attributed to the transformation of organic matter, particularly wood. When extensive forested areas are buried beneath sediment layers, wood undergoes combustion and decomposition due to heat from below and pressure from above, gradually converting into coal. However, this process spans centuries to reach completion.

Coal is categorised based on its carbon content:

Anthracite: This represents the highest quality coal, boasting carbon content ranging from 80% to 95%. Anthracite possesses the highest calorific value but is found in limited quantities, notably in Jammu and Kashmir.

Bituminous: With a carbon content of 60% to 80% and low moisture levels, bituminous coal is widely used and boasts a high calorific value. Such coal is abundant in regions such as Jharkhand, West Bengal, Odisha, Chhattisgarh, and Madhya Pradesh.

Lignite: Typically displaying a brown hue, lignite contains 40% to 55% carbon content. Lignite has a high moisture content, resulting in smoke emission when burned. Lignite deposits are found in Rajasthan, Lakhimpur (Assam), and Tamil Nadu.

Peat: Characterised by its carbon content of less than 40%, peat possesses a low calorific value and burns in a manner similar to wood.

Regulation

Mineral ownership and regulation in India are governed by specific guidelines and authorities. The key points regarding mineral ownership, granting mineral concessions, and the roles of the central and state governments are as follows:

1. Mineral Ownership:

Minerals within the boundaries of a state are owned by the respective State Government.

Minerals located under the ocean within India’s territorial waters or Exclusive Economic

Zone is owned by the Central Government.

2. Granting Mineral Concessions:

State Governments have the authority to grant mineral concessions for all minerals located within their state boundaries.

This granting of mineral concessions is performed in accordance with the provisions outlined in the Mines and Minerals (Development and Regulation) Act, 1957, and the Mineral Concession Rules, 1960.

3. Central Government Approval:

Approval from the Central Government is required for minerals specified in the First Schedule to the Mines and Minerals (Development and Regulation) Act, 1957. This includes minerals such as coal, lignite, and minerals belonging to the ‘rare earths’ group containing Uranium and Thorium.

4. Minor Minerals:

The Central Government can notify certain minerals as ‘minor’ minerals from time to time.

For minor minerals, the State Government can decide on procedures for applications, granting mineral concessions, determining rates of royalty, assessing dead rent, and the power to revise orders.

Building stones, gravel, regular clay, and common sand are examples of minor minerals.

These regulations and ownership principles are crucial for the management and utilisation of India’s mineral resources, ensuring that both state and central governments play their respective roles in overseeing mineral concessions and development while safeguarding national interests.

Reforms in the Coal Mines Act

The Mineral Laws (Amendment) Act, 2020 was introduced to make revisions to the Coal Mines (Special Provisions) Act, 2015 (CMSP Act), and the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act). These amendments brought about several significant changes:

1. Allocation of Coal Blocks:

The amendments allowed for the allocation of coal blocks for composite prospecting licences combined with mining leases. This expansion aimed to increase the inventory of available coal and lignite blocks. Additionally, obtaining prior approval from the Central Government, especially in cases where the Central Government itself had allocated or reserved coal/lignite blocks, was eliminated.

2. Flexibility in End Use:

The Central Government gained greater flexibility in determining the end use of Schedule II and III coal mines under the CMSP Act. Furthermore, companies without prior coal mining experience in India were permitted to participate in coal block auctions.

3. Auction Methodology:

The amendments approved a methodology for auctioning coal and lignite mines/blocks for revenue sharing in accordance with the CMSP Act and the MMDR Act. Key features of this methodology are as follows:

• Bidders bidding for a percentage share of revenue payable to the State Government, applying to both fully explored and partially explored coal blocks.
• The upfront amount was determined based on the estimated geological reserves.
• Successful bidders were incentivized for early production, coal gasification or liquefaction, and the exploitation of coal bed methane.
• The sale or utilisation of coal from the coal mine were not restricted, and provisions were made for the relinquishment of partially explored coal mines by successful bidders.

4. Commercial Mining Launch:

The Central Government issued directions to the Nominated Authority to conduct auctions for 38 coal mines for coal sale under the CMSP Act and the MMDR Act. Following the completion of all necessary processes, Commercial Mining was initiated on June 18, 2020.

Conclusion

The Coal Mines (Special Provisions) Act, 2015, is a landmark legislation in managing India’s coal resources efficiently, transparently, and responsibly. By replacing opaque allocation methods with competitive bidding, the act ushered in an era of modernisation in the coal sector, fostering competition, private sector participation, and economic growth.

The emphasis on transparency and end-use restrictions curtailed corruption and ensured that coal allocations served specific industrial needs, maximising resource utilisation. Furthermore, the Act addressed India’s historic reliance on coal imports by boosting domestic production, contributing considerably to energy security.

Crucially, the act also acknowledged environmental concerns, promoting cleaner technologies and environmental compliance. The Act exemplified India’s commitment to balancing energy security and sustainability in the coal mining industry. Therefore, the act remains a cornerstone of India’s efforts to navigate the complex challenges of the coal sector while striving for economic growth and environmental stewardship in the twenty-first century.