The coal ministry extended the upfront payment waiver to partially explored coal blocks. This move aims to boost underground mining across the country. The ministry said, "In order to further incentivise the adoption of underground mining, the Competent Authority has approved the proposal to extend the benefit of waiver."
In a significant move aimed at boosting underground mining in the country, the coal ministry has extended the benefit of waiver of upfront payment to partially explored coal blocks too. Currently, companies undertaking underground mining in partially explored blocks pay an upfront amount calculated at 0.2 per cent of the value of the estimated geological reserves in the block.
The current methodology for the auction of coal blocks for sale of coal under the Coal Mines (Special Provisions) Act and the MMDR Act prescribes the floor percentage of revenue share at 4 per cent. In addition, the allocatee company is required to deposit a 2 per cent upfront amount. However, in the case of coal mines classified for underground mining, the floor percentage of revenue share is set at 2 per cent, along with a complete waiver of upfront payment.
In the case of partially explored coal mines, because it cannot be predetermined whether the mine is suitable for underground, opencast or mixed mining, such mines are offered for auction with a floor price of 4 per cent revenue share. Therefore, in cases where the successful bidder undertakes underground mining in such coal mines after exploration, the upfront amount becomes payable under the existing provisions.
In an order issued today, the ministry acknowledged that underground mining requires higher initial investment, has a longer gestation period and is marked by a higher cost of production compared to opencast mining. However, the environmental benefits of underground mining certainly override such financial metrics, making it the preferable method of mining.
"In order to further incentivise the adoption of underground mining, the Competent Authority has approved the proposal to extend the benefit of waiver of the upfront amount to future successful bidders of partially explored coal mines not classified for underground mining in the tender document at the time of auction, provided that the successful bidder undertakes mining exclusively through the underground method," the ministry said.
It added that such partially explored coal mines will not be permitted to be converted to opencast or mixed mining at any stage during the life of the mine.
The government had issued the original methodology for the auction of coal and lignite blocks for sale of coal and lignite in May 2020. The methodology has already been amended thrice since then.