Aatma Nirbhar Bharat: Reforms in coal sector

Reading time: 8-10 minutes.

Atma Nirhar Bharat Abhiyan, a movement seeking to make India self-reliant was announced by the Prime Minister of India on 12th May, 2020. He highlighted Economy, Infrastructure, System, Demography and Demand as the focus areas of self-reliance. For this purpose, an economic package of Rs 20 lakh crore was also promised. Reforms in coal sector are a sequel to this announcement. 

Finance Minister Nirmala Sitharaman, on May 16, 2020, introduced structural reforms in the key sectors- coal, defence, space, power, civil aviation, atomic energy and social infrastructure.

She released the fourth tranche of a Rs.20 lakh crore overall package to cope with the Covid-19 pandemic’s economic fallout. The government announced a reduction in foreign direct investment in defence production, the privatization of six more airports, the starting of more airbases and the privatization of   commercial coal mining. The aim was to boost the sagging economy.

Reforms introduced

The reforms introduced in the coal and minerals sector include the following:

  1. Starting commercial mining in coal sector
  2. Liberalising entry norms-nearly 50 blocks to be offered for auction
  3. Incentivising coal gasification/liquefaction through rebate
  4. Earmarking Rs.50,000 crore for infrastructure development in coal sector
  5. Auctioning Coal Bed Methane extraction rights in Coal India’s mines
  6. Introducing seamless composite exploration-cum-mining-cum-production regime in minerals sector, 500 blocks to be auctioned
  7. Joint auctioning of bauxite and coal mineral blocks
  8. Rationalising stamp duty payable at the time of award of mining leases.

Relevant legal provisions related to the reforms

The relevant provisions, Acts, Ordinances and Rules regarding the coal sector reforms are as follows:

The Mines and Minerals (Development And Regulation) Act, 1957- This Act provides for the production and management of Union regulated mines and minerals. It claimed that it would be convenient in the public interest for the Union to take charge of mining policy and mineral production extent hereinafter provided.

The Coal India (Regulation of Transfers And Validation) Act, 2000– This Act empowers the Central Government to direct the transfer of the land, or of the rights in or over land or in reference to a coal mine, coking coal mine or coke oven factory, owned by Coal India Limited or a subsidiary company by any subsidiary of Coal India Limited or any other particular activity and validating such transfers of such property or assets.

The Coal Mines (Special Provisions) Act, 2015- This Act provides for the assignment of coal mines and the transfer of rights, title and interest in and over property and mining assets in accordance with mining leases to successful bidders and allocated parties with a view to ensuring consistency in coal mining projects and coal production and facilitating the optimal use of coal resources in line with national requirements, interest and for matters connected therewith or incidental thereto.

Mineral Laws Ordinance, 2020-

On 10th January, 2020of the  Mineral Laws (Amendment) Ordinance 2020 was promulgated  to amend the Mines and Minerals (Development and Regulation) Act 1957 and Coal Mines (Special Provisions) Act 2015.

 The Ordinance completely opens up the coal sector to commercial mining. It also plans to wipe out limits on end-use involvement in coal mine auctions. It permits coal mining by any organization existing in sectors apart from steel and electricity, and the captive end-use requirements were scrapped. The Ordinance was converted into an Act on 13th March, 2020.

Coal Blocks Allocation (Amendment) Rules, 2020- On 18th May, 2020; the Ministry of Coal issued a notification, which was an amendment to the Coal Block Allocation Rules, 2017. The notification was issued in exercise of the powers under the Mines and Minerals (Development and Regulation) Act, 1957. The amendment brought about some changes in the methodology for auction of coal and lignite mines/blocks for sale of coal / lignite on revenue sharing basis and tenure of coking coal linkage

All the aforesaid legal provisions were introduced to give shape to  the newly announced reforms on 16th May, 2020, for the Aatma Nirbhar Bhaarat Plan.

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Objectives of reforms

The objectives of the reforms in the coal sector are as follows:

  • They will bring transparency, ease of doing business and ensure that natural resources are used for national development;
  • Will usher in efficiency into the coal sector by moving from an era of monopoly to competition;
  • Would help India gain access to high-end technology for underground mining used by miners across the globe.
  • This will speed up the process of implementation of projects, simplification of procedure and benefit all the parties in areas where minerals are located.
  • This would open up the sector to players outside steel and power as well as remove end-use restrictions.
  • It will create an efficient energy market and bring in more competition as well as reduce coal imports.
  • Sectorial reform for mining of minerals will boost growth, employment and bring state-of-the-art technology, especially in exploration.
  • Large mining investment would build employment and ignite demand in critical sectors including mining equipment and heavy commercial vehicles.
  • If multinationals decide to invest, the country could profit from the infusion of sophisticated mining technology, especially for underground mines.
  • The reforms are also aime at lowering environment impact.

Relevance in law

  • Company Law

Announcing measures under the fifth and final tranche of the Rs 20-lakh crore stimulus package for the economy hit hard by the coronavirus pandemic, the minister also said an Ordinance would be promulgated to amend the Act. The government will promulgate an Ordinance to amend the Company’s law to decriminalise various provisions, permit direct overseas listing for Indian corporates and changes to further improve the ease of doing business.

As many as 58 Sections under the Act would be dealt with under the mechanism compared to 18 earlier. Also, seven compoundable offences would be dropped altogether and five would be dealt under the alternative framework. Amendment would be carried in Section 23 of the Act for including an enabling provision to allow direct listing of securities by Indian public companies in permissible foreign jurisdictions. This would provide alternative source of capital for domestic companies and also broaden their investor base.

  • Coal Mining

The Cabinet has approved promulgation of Mineral Laws (Amendment) Ordinance 2020 to amend Mines and Minerals (Development and Regulation) Act 1957 and Coal Mines (Special Provisions) Act 2015.

The ordinance will seek to amend the law that allows only companies in the coal mining industries to bid for coal mines. Post amendment, any company meeting the minimum criteria will be allowed to bid for coal mines, the first auction of which under the liberalized rules is set open within this month.

Critical analysis

One school of thought believes that introduction of coal reforms is misdirected because most of the industries are shifting to renewable sources of energy, so there will be hardly any buyers or investors for coal. The current investors are, moreover, burdened with loans and other financial hardships.  

Even though coal is considered to be a cheap resource, there are external factors like social, health and environmental hazards, which haven’t been taken into account. If the externalities were factored, it would double or triple the price of coal, which would make it more expensive than the renewable sources of energy.

The gasification of coal is unviable because the process involves pulverisation which turns coal into smaller particles and synthetic gas, under pressure, which is corrosive in nature. Aggregate gaseous carbon intensity is much worse than coal mining. Coal gasification is also an intensive extraction process which uses large quantities of water, which is already scarce in our country.

Critics argue that these reforms undermine the energy security of the country by removing the requirement of end use for sale of coal and also compromise with the safety and security of workers in coal mines.

Although the reforms were introduced to boost the sagging economy, the government didn’t possibly take into account the factors that would sabotage the motive of such measures in long term.  

Conclusion

As is the case with any reform initiative, coal sector reforms have also generated mixed reactions from different quarters. The government has been extolling the reforms as phenomenal as it strikes at the very root of age-old monopoly and resultant inefficiency in the coal sector. The claim is that  it will in the long run be in consumer interest and make India self-reliant on energy front. The critics on the other hand have been arguing that the initiatives are devoid of the current reality and ignore the trend of movement towards renewable sources of energy. Despite criticism, the intent of the reforms cannot be doubted. Given the socio economic condition of India, the country has to depend on coal in near and medium term. Hence, the reforms are timely. The challenge, of course, lies in implementation of the reforms in true sense. But we can and should hope for the best.

Author: Tannishtha Chatterjee from Amity Law School, Noida.

Editor: Muskaan Garg from Jindal Global Law School, O.P. Jindal Global University, Sonipat, Haryana.

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