Coal India plans to auction 20 closed mines in next few weeks

01 May 2022

Coal India Limited (CIL) will invite bids from the private sector to restart 20 closed mines in the coming weeks as a severe heatwave fuels power crisis.

The state-owned CIL has established a revenue-sharing scheme for the most unprofitable and subterranean mines.

It is preparing to invite bids from private sector power generators, including those that rely on imported fuel.

The officials told the media that the bids for CIL's first batch of shuttered mines might come in a few weeks or early next month. This pilot might lead to the auctioning of over 200 mines in stages.

A coal ministry official said that the process of identifying the mines is underway. Once all of the mines are auctioned, they will have the capacity to add roughly 150 million tonnes (mt) of coal per year, which will be enough to keep all of the power plants running at their full capacity, regardless of surges in demand.

Essel Mining, Adani Group, Tata, JSW Group, and Jindal Steel and Power Limited (JSPL) were among the private corporations that attended a stakeholder meeting with the coal ministry in February.

As many of these corporations also operate power plants that use imported fuel, access to domestic coal, which is 150-200% less expensive, may attract them. These firms have expressed strong interest in the auction concept.

To guarantee that the sale proceeds, the coal ministry has simplified the bidding process.

There are no minimum technical requirements for bidders, such as a firm's minimum financial worth, to qualify for bids. To join, a bank guarantee would suffice.

With the mine developer and operator (MDO) model already in place, companies bidding for closed mines do not need to be technically trained to conduct the mining work, which might be outsourced for a price.

Closed mines would be auctioned under the MDO model, which requires bidders to split the revenue with the government. CIL will retain control of the mines, and winning bidders will extract coal for sale.

The 20 mines up for auction in the first round are divided throughout CIL's five subsidiaries.These mines have a total extractable resource of 380 mt, with an annual production capacity of 30 mt.

Some of the mines have been closed since 1999, while others are still operational. Due to the high cost of extracting coal and huge technical hurdles, CIL has shuttered approximately 100 mines in the previous 4-5 years, while a comparable number has remained abandoned.

In 2021-22, India's total coal output was 772.59 mt. The production target for the financial year (FY) 2023 is roughly 880 mt. By the 2022 end, this amount might rise to 900 mt due to coal from abandoned mines.

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Also read: Coal India exceeds its coal supply commitment to electricity plants

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