BANGALORE - India is set to hold its first commercial coal mine auctions in October, and is currently accepting bids with technical specifications. In the next phase, shortlisted companies will submit financial bids.
But the coal ministry has already had to review the initial list of 41 coal blocks because of opposition from states with the largest coal reserves.
For seven decades the government-owned Coal India had a monopoly on coal mining and it accounts for 80 per cent of the coal mined in the country. Private companies were allowed to mine coal for their own use, not for sale to others.
On June 18, Prime Minister Narendra Modi announced a policy to allow foreign investors, non-mining entities and large miners to mine coal commercially, without restrictions on end-use or price.
After initially allowing 100 per cent foreign direct investment, the coal ministry issued a notification after border clashes with China in Ladakh last month, asking foreign investors to seek approval before participating.
Coal Minister Pralhad Joshi said that, despite having the world's fourth largest coal reserves, India imports around 235 million tonnes of coal a year. The government wants to replace this with domestic supply.
The 41 new blocks have 225 million tonnes of coal, and their commercial auction is expected to raise 330 billion rupees (S$6.1 billion). The coal sites are spread across five states.
As soon as auctions were announced, the government of Jharkhand, a forested central Indian state with nine of the 41 coal blocks, challenged the decision in the Supreme Court. The state has the largest coal reserves in the country and a quarter of its population is from indigenous communities.
Jharkhand's legal suit claims the federal government's action is "unilateral, high-handed, arbitrary and illegal", and that it is inappropriate to hold auctions during the Covid-19 pandemic, when the state machinery should be working to "alleviate the problems of citizens."
Six of Jharkhand's nine allotted coal blocks fall in areas with large indigenous populations who have special constitutional protections. Auction of mines in these areas would impinge on their rights and "lead to large scale displacement," the state government said.
The Maharashtra state government also objected to the inclusion of a coal mine that lies within a tiger reserve. In mid-July, the central government withdrew this coal block from the list.
Nine village leaders from another small coal-rich state, Chhattisgarh, wrote to Mr Modi demanding a stop to the auction of coal blocks in the biodiversity-rich 170,000ha Hasdeo Arand forest. After meeting with state government officials last month, Mr Joshi said five blocks in eco-sensitive areas would be removed from the auction list, and three others added.
Locals in heavily mined regions of Odisha and Madhya Pradesh have also protested, but the state governments, political allies of the ruling party, have not challenged the auctions.
Coal-fired plants make up 55 per cent of India's installed power capacity, and account for 80 per cent of all industrial emissions. Despite a push for renewable energy to make up 40 per cent of the energy mix by 2040, experts say calorific value and the ash content can go as high as 35 per cent.
An official in Jharkhand's coal department said they were concerned that "the prevailing poor economic conditions under the pandemic" could also lead to lower bids from companies and a significant loss in revenue for the state.
Mr Joshi has dismissed concerns about a dip in investor interest as "unfounded".
India's largest coal mining services provider and trader Adani Group, which invested in Australia's controversial Carmichael coal mine, has decided to sit the auction out.
