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Concept Of Coal Banking System: Utilization Of Surplus Coal From Captive Mines

Coal plays a significant role in Indian economy by contributing over half of country's commercial energy and it is expected to remain the mainstay of India's energy sector. Hence it is important that coal reserve of the country need to be utilized optimally. As per Working Group on coal and Lignite, for twelfth plan production of coal is projected at 795 Million Tonnes whereas demand during same plan is expected to be 980 Million Tonnes. This envisages a need to enhance the domestic coal production as there exists a demand-supply gap of 185 Million Tonnes.

A committee was formulated by government to analyze existing coal distribution policy and suggest option to enhance production from captive coal mines to augment domestic production. The Committee considers economical benefits from surplus coal of captive coal mines to be brought in the domestic market.

The objective of the Coal banking system is to utilize the surplus coal available with captive coal miners for the economy, specifically with plants with approved end-use. However, the coal thus provided need to be returned to the original producer. In this system it is assumed the coal surpluses may be initially available with some companies while others may have deficit at that point of time. At a subsequent date, the other set of companies may have surpluses which they would be in a position to return the original company doing the coal banking. Hence, the objective of the system is for smoothening of the demand-supply curve.

Thus the concept of Coal banking assumes banking of coal with Coal India Limited/other user in same sector and refunds the same consequently in installments. It also analysis advantages of banking the coal to the surplus coal producer. The firm producing surplus coal has two options of disposing coal with either the nearest Coal India (NASDAQ:CIL) subsidiary or other firms in the same sector facing shortage in linkage coal from CIL.

Under current legal provisions of Coal Mines (Nationalisation) Act, 1973 and MMDR Act, 1957 and Colliery Control Rules, 2004, there is no provision of sale of coal from the captive coal blocks allotted. However Government can issue directions for surplus coal disposal under the Colliery Control Rules, 2004. Such directions can provide for its transfer or sale to CIL or any other unit with approved end-use. It requires a specific policy to be formulated which stipulates the terms of disposal and pricing.

The pricing of surplus coal is proposed to be the price of corresponding grade of coal being charged by CIL from domestic customers. It also proposed by committee that it should be applicable for a period of three years, after which a review may be undertaken and such amendments as may be considered appropriate made.

A report on coal banking is prepared by B.K Chaturvedi committee which is approved by Prime Minister Office and forwarded to Ministry of Coal to formulate suitable policy in this regard.