The prime minister is set to consider a proposal to allow owners of captive coal blocks to sell excess production to state-run Coal India, a move being opposed by the coal ministry.
As per the proposal mooted by the Planning Commission, three quarters of the revenue from sale of surplus coal to Coal India at notified prices would go to the exchequer while the rest would be incentive for the mining company.
The proposal will be taken up by Prime Minister Manmohan Singh on Monday when he meets coal and power secretaries along with top Commission officials to take stock of the sectors and discuss issues related to critical coal supply to power projects, future of imported coal-based projects and the financial health of distribution companies.
A senior Planning Commission official said the move could, to an extent, help tackle the problem of widening coal deficit and reduce dependence on coal imports. Coal accounts for over 50% of the country's power generation capacity. Its deficit in the country is likely to grow to 137 million tonne by this the end of the fiscal.
Of 89 thermal projects in the country, 32 have coal to run for less than four days, as against the normative requirement of 22 days. Another 20 plants have just seven days' stock.
Mining companies say the move could bring much-needed reforms in the coal and power sectors. The coal ministry, however, is against the proposal.
A senior coal ministry official said commercial mining by captive block owners would be illegal as there is no provision for it in the Coal Mines Nationalisation Act of 1973. The ministry has also warned that such a move could lead to captive coal block owners diverting coal meant for end-use projects to coal companies.
Of the 193 blocks allocated so far to cement, power and steel companies, only 28 have actually started production. "We are afraid that companies might stop their end use projects and make money by selling to coal to coal companies.
Also, the blocks were given to the companies free of charge and they should not be allowed to make money on national asset," the official said.
"Blocks have reserves matching with their end use projects. If part of reserves are diverted for other purposes, block holders would again turn to government for more coal," he said.
An executive of private power producer Adani Power said implementation of the proposal could help companies save foreign exchange spent on importing coal. A senior executive of Lanco said, "Increasing coal production in the country should be the main concern. Ways to do it can be deliberated upon."
Earlier, a committee headed by Ashok Chawla on natural resources had also recommended allowing surplus coal from captive mines to be competitively sold to registered end users via a platform created by Coal India.
The coal ministry is also in the process of drafting a policy on use of surplus coal and coal rejects by captive coal block owners.