The union government is mulling on offering incentives for underground coal mining and coal gasification in a bid to draw private sector interest.

Union coal secretary Amrit Lal Meena, who was in the city to inaugurate the 10th Asian Mining Congress and the International Mining Equipment and Minerals Exhibition said that India’s share of coal production is less than 4 percent from underground coal mines and there is now an effort to push the contribution from this less polluting method of mining.

“We are very conscious of the fact that though we need coal, it cannot be at the cost of environmental degradation. We want to promote underground coal mining in a big way. Therefore a high level committee was constituted which has submitted its report. Based on that report, major incentives are contemplated at the government level.”

“We want wider participation of the private sector in the promotion of underground coal mining. Many of the blocks that are now planned to be offered in auction for underground coal mining will come with a lot of incentives,” said Meena.

The incentives could be financial in nature to facilitate viability gap funding.

The coal secretary further said that after meeting the requirements of thermal power generation and the unregulated sector, there is a plan to utilise coal for gasification and a national mission has been launched to achieve coal gasification and liquefaction of 100 million tons of coal by 2030.

Already two initiatives have been taken in this regard. In the coal auction framework, gasification has been notified as one end use. This means there is assured availability of coal almost at the notified prices for corporates who want to set up the gasification plants. For the captive and commercial mine owners, if they want to gassify their coal, then there is a rebate of 50 percent on revenue share.

“There are two three other incentives which are likely to come up in the near future to create an enabling environment for setting up of coal gasification units in the country,” Meena said.

Infrastructure status

Coal ministry has requested the Department of Financial Services to consider classifying the coal sector as “Infrastructure Sector” so that banks and financial institutions can shed their reluctance to lend to the sector.

This comes after industries have highlighted that with rising impetus on environmental, social and governance (ESG) norms, most banks and financial institutions are reluctant in engaging in projects related to coal.

“There was input from the coal mine auction holders to facilitate credit flow. So, we have taken up with the ministry of finance to include this into infrastructure. Coal mining requires a lot of infrastructure development such as construction of railway lines, setting up coal evacuation infrastructure apart from mining activities. If that happens, then the banks and financial institutions would be at ease to lend to these companies,” said Meena.

Next auction

The government is expected to come out with another round of commercial coal mine auctions for 40 coal blocks later this month. Government has already auctioned 91 blocks for commercial coal mining in the last 3 years.

Coal India plan

Coal India chairman PM Prasad who was present at the event said that over the next 7-8 years there is an aspiration to scale up underground coal production to 10 percent of total production from the present level of around 2-3 per cent.