Denationalisation – the art of the possible?


The Central Government has decided to denationalise the mining and selling of coal in the aftermath of the alleged corruption in coal block allocations. Will this make the mining industry more efficient? What will be the actual impact of this on the coal industry and the sectors dependent on it? A close look at the issue.

It may soon become possible to mine and sell coal commercially; the government sees an opportunity both in its parliamentary strength, and in the recent coal mining disarray. Faulty procedures followed by the previous governments in allocating coal blocks led to an outcry over ‘corruption’; eventually, the Supreme Court cancelled 204 (this includes operational, about to become operational and yet to be explored mines) coal block allocations in October 2014. India’s power sector remains highly coal dependent (despite all the talk of renewable, clean energy); besides power, iron and steel and the cement industries are major users of coal. To avert an apparent power sector catastrophe, the government promulgated the Coal Mines (Special Provisions) Ordinance, October 2014, to auction the cancelled coal blocks.

Since the 1973 Coal Mines Nationalisation Act, coal mining has mostly been in the public sector. Nationalisation was considered necessary to conserve and allocate the scarce natural resource towards planned usage. Equally critical was the issue of land and villages above and around the coal mines. Some private players were allowed to mine and use for specified purposes, and only as captive end users, they were not to sell coal. Coal India Limited, the largest public sector player in the mining sector, enjoyed a unique status.

Under the provisions of the Coal Bearing Areas (Acquisition & Development) (CBA) Act, 1957, Coal India Limited acquired the same status of becoming a deemed lessee of the concerned state governments, in relation to the lands over the coal bearing areas acquired under this Act. The deemed leases being in the nature of statutory leases, Coal India Limited did not have to obtain separate leases under the MMRD Act, 1957, from the concerned state government in respect of the nationalised mines and the coal bearing lands acquired under the CBA Act.

However, in case, any of the companies eligible to do coal mining in the country including CIL and the other government and private coal companies, wanted to acquire coal bearing lands under the Land Acquisition Act, 1894, they were required to obtain coal mining leases from the central government and the concerned state governments in that order. The coal mining leases under the relevant regulatory Act were granted for 20-30 years initially, which were to be renewed for a further period of 20 years with the previous approval of the central government. The coal mining leases were ordinarily subject to a ceiling of 10 sq. kms.

Ostensibly under multi-lateral financial institution pressure to restructure and deregulate the economy, the post liberalisation period made it possible to amend the Act (1993) and allow private companies to mine coal (for captive consumption). Up to this point, private companies still could not mine to sell coal.

In December 2014, the Coal Mines (Special Provisions) Bill 2014 was introduced. The Bill provides for allocation of coal mines and the right, title and interest in and over the land and mine infrastructure, together with mining leases, to successful bidders. This will occur through a transparent e-bidding process. This time it is possible to make the land above and coal below available to the highest bidders without end use restrictions. It is suggested that this will make the mining industry more efficient.

The new Bill that replaces the ordinance seeks to allow commercial mining in the country, apart from re-allocating 72 of the cancelled ‘operational’ coal mines for end-usage to the power, steel and cement sectors. So in effect, ‘elimination of corruption’ and ‘introduction of transparency’ have become both the canopy and armoury with which the forces of denationalisation can march forward.


Anuradha Kalhan

The writer is a Fellow at Teen Murti, Nehru Memorial Museum and Library (NMML).