The cabinet on Wednesday approved commercial coal mining, with the auctions for allocation to be based on the principal of revenue sharing. The floor rate of revenue sharing is four per cent. The move ends the monopoly of state-run Coal India in the commercial production of the dry fuel. Earlier, mines were allocated on the basis of rupees paid per tonne.

The cabinet committee on economic affairs, chaired by Prime Minister Narendra Modi, has approved the methodology, the coal ministry said in a release.

“This methodology provides that bid parameter will be revenue share. The bidders would be required to bid for a percentage share of revenue payable to the government. The floor price shall be 4 per cent of the revenue share.

“Bids would be accepted in multiples of 0.5 per cent of the revenue share till the percentage of revenue share is up to 10 per cent and thereafter bids would be accepted in multiples of 0.25 per cent of the revenue share,” the release said.

The revenue sharing model is based on the recommendations of an expert committee headed by former Central Vigilance Commissioner Pratyush Sinha that was formed after the fourth and fifth rounds of auctions received a tepid response.

Earlier, the blocks were awarded on a fixed payment-per-tonne basis, which the government believed was impeding production.

Despite having the world’s fourth largest reserves, India imports around 235 million tonnes (mt) of coal, of which around 135mt, valued at Rs 1,71,000 crore, could have been met from domestic reserves.

There shall be no restriction on the sale and/or utilisation of coal from the coal mines, the ministry said.

With the development, the coal mining sector has been completely opened to the private sector with no-end use restrictions to participate in the auctions. There would be free trade of coal as producers can use, sell or export coal.