UNIVERSITY OF PETROLEUM & ENERGY STUDIES

COLLEGE OF LEGAL STUDIES

B.A., LL.B. (HONES.), ENERGY LAWS

SEMESTER - VI

ACADEMIC YEAR: 2017 -18 SESSIONS: FEB- MAY

PROJECT
FOR
Mining Law

Under the Supervision of: Mr. Sam Babu K.C.

NAME: ROHAN PATHAK

SAP NO: 500044988
ROLL NO : 81
Future of Nationalisation of Coal Mines

Introduction
India has a long history of commercial coal mining covering nearly 220 years starting
from 1774 by M/s Sumner and Heatly of East India Company in the Raniganj Coalfield
along the Western bank of river Damodar. However, for about a century the growth of
Indian coal mining remained sluggish for want of demand but the introduction of steam
locomotives in 1853 gave a fillip to it. Within a short span, production rose to an annual
average of 1 million tonne (mt) and India could produce 6.12 mts. per year by 1900 and
18 mts per year by 1920. The production got a sudden boost from the First World War
but went through a slump in the early thirties. The production reached a level of 29 mts.
by 1942 and 30 mts. by 1946.

With the advent of Independence, the country embarked upon the 5-year development
plans. At the beginning of the 1st Plan, annual production went upto 33 mts. During the
1st Plan period itself, the need for increasing coal production efficiently by systematic
and scientific development of the coal industry was being felt. Setting up of the National
Coal Development Corporation (NCDC), a Government of India Undertaking in 1956
with the collieries owned by the railways as its nucleus was the first major step towards
planned development of Indian Coal Industry. Along with the Singareni Collieries
Company Ltd. (SCCL) which was already in operation since 1945 and which became a
Government company under the control of Government of Andhra Pradesh in 1956,
India thus had two Government coal companies in the fifties. SCCL is now a joint
undertaking of Government of Andhra Pradesh and Government of India sharing its
equity in 51:49 ratio.1

A Brief History of Coal Mining in India

Historical records show that even in ancient times people used metals and alloys for
their daily living. The Asoka-Pillar, the Pillar in the Kutub-Minar and development of the
Cannons in the early historical period provide ample proofs of the use of molten iron in
ancient times and medieval India. At that time coal was used for melting metals. The
ruins of smithy furnaces and slack hips close to the coal deposits in the Eastern regions
indicate that the coal was used in the metallurgical processing even as early as 2000
years ago. Ancient scriptures suggest that the name of the Damodar, the main river in
the Eastern India, on the banks of which the reserve of coal is abundant has its origin in

1
HISTORY/BACKGROUND, AT https://coal.nic.in/content/historybackground
the phrase “Dam-Udare-Jahar”, i.e. fire in the belly.2 The names of some villages like
Angarpathra (pot of burnt coal), Kalipahari (Black Mountain) near Asansol in the Eastern
region suggest the existence of coal deposits in these areas and confirm previous
knowledge of the people of these areas in the presence of underground coal deposits
long before the mining operations began. Thus, there are evidences that coal was
known as fuel resource in India. However, there was no record or documentation
regarding the coal industry until the middle of the18th century. Some records show that
as far back as in 1774-75 shallow mines were used to be operated first in Raniganj
fields of West Bengal, which is considered the birthplace of coal mining in the Country.

A systematic survey of coalmines was conducted in 1845-46 and again in 1860, when it
was found that there were about fifty collieries in the area producing 28,200 tonnes of
coal. At first, coal mining was limited to the Raniganj Coalfields but during the later part
of the 19th Century, exploration started elsewhere in the country. At the beginning of the
20th century, coal production in India reached 6 million tonnes. During the First World
War period, increased demand for coal gave impetus to the development of coal
industry. In 1919, the production of coal rose to 21 million tonnes. In subsequent years,
the industry suffered a setback due to great depression just after the World War 1. The
years from 1937 to 1942 constituted another important period, when international
demand for coal steadily rose. Meanwhile, quite a number of quarries and pits were
operated in the Raniganj, Orissa, and Madhya Pradesh Coalfields. The Coal Mining
Committee set up by the Imperial Govt., submitted their report in 1936 on the measures
for securing safety and preventing waste of available coal. In the year 1945, the
Singareni Collieries Company Limited (SCCL) was formed as the first Government
owned Coal Company in the country. In that year, Government of Nizam of Hyderabad
bought all the shares of the company and brought the company under India Trust Fund
of the Nizam Government. The said company actually started production in 1889 at
Yellandu area of present Andhra Pradesh and raised 60,000 tonnes of coal in that year.
3 In 1947, India achieved its independence. Subsequently Five Year Plans were
launched with ambitious targets of coal production. Realizing the importance of coal to
the development of India, our motherland, National Coal Development Corporation
(NCDC) was set up in 1956. Most collieries belonging to the Indian Railways were
transferred to the NCDC to bring about rationalization in coal industry. NCDC brought a
major change in the lives of the coal miners and their standard of living. In 1960, coal
industry suffered a setback in as much as demand could not consume supply. This was
due to slippages in achieving targets by steel, power and other industries. During the
sixties, the coal industry passed through a period of cheap availability of oil3. The
situation, however, took a radical turn in the seventies due to spiraling up of oil prices

2
A BRIEF HISTORY OF COAL MINING AND COAL DEPOSITS IN INDIA, AT
http://shodhganga.inflibnet.ac.in/bitstream/10603/122754/11/11.
3
http://shodhganga.inflibnet.ac.in/bitstream/10603/122754/11/11
resulting in hike in coal demand. The Central Government took the decision to bring
coalmines under the State Control. This was the last phase of coal industry in the hands
of the private owners. It is important to note that at that time the private owners were
producing nearly 75 percent of the total coal production. There was a complete anarchy
and chaos in the production and distribution of coal in spite of increase in demand for
coal.

Considering the above facts and for proper safety and security of the miners,
conservation of coal, and systematic mining to meet increasing demand of coal
especially from Iron and Steel companies and power (thermal) companies, the
Government of India, on October 16, 1971, promulgated the Coking Coal Mines
(Emergency Provisions) Act, 1971. Thereafter, Government of India took over the
management of all 226 coking coalmines except captive mines of IISCO, TISCO and
DVC, subsequently nationalized them on May 1, 1972, and brought under the control of
newly formed Bharat Coking Coal Limited (BCCL) to look after the coking coalmines
and for streamlining its production. Consequently, the private owners of non-coking
coalmines stopped further investment and started violating the safety laws and
underpaying workers for short-term gain, as they were afraid of further nationalization of
non-coking coal mines very soon. Thus, keeping all these factors in consideration
Government took over the management of all 711 non-coking coalmines of the country,
then operating, on January 30, 1973 and subsequently nationalized them on May 1,
1973 and thus a new era began. In order to provide for a higher growth in coal sector to
meet the growing energy needs of the country, the Government nationalized coalmines
by enacting through the Parliament the Coal Mines Nationalization Act in 1973. The
section III of the Act says, “No person, other than the Central Government or a
Government Company or a Corporation owned, managed or controlled by the Central
Government shall carry on coal mining operation in India.” Thereafter, pursuant to the
nationalization of coalmines, all non-coking coalmines were brought under ‘Coal Mines
Authority Limited (CMAL)’, which was incorporated as a government company under the
Companies Act 1956, on June 14, 1973, having three divisions, Eastern Division,
Western Division and Central Division. The CMAL was then under the administrative
control of the Department of Coal, Ministry of Energy, Government of India.

On November 1, 1975, the Department of Coal, Ministry of Energy, and Government of

India incorporated the present ‘Coal India Limited (CIL)’ as a holding company. The
objective was to integrate and streamline the structural set up and to bring both coking
and non-coking coalmines in one controlling unit that was to be responsible for the
entire coal mining sectors owned and controlled by the Central Government.
 CMNA, 1976
The Coal Mines Nationalization Act 1976, or the CMNA had a provision that mining
lease to any institution that is not “Central government, Central government company or
Central government corporation” is illegal. In 1993, this act was amended to allow for
sub-leases to be granted if two conditions are satisfied:
1. the reserves of coal in the area are in isolated small pockets or are not sufficient for
scientific and economical development in a coordinated and integrated manner
2. the coal produced by the sub-lessee will not be required to be transported by rail.
This implies that if the coal blocks had junk, it could be sub-leased and that the junk
could not blacken our railroads. With this, the central government had introduced
its Captive mining policy in 1993.

Captive Mining Policy

Captive Mining Policy is there in place since 1970s but it became a major policy only
after 1993. In 1970s, all the coal mining private leases were terminated via the Coal
Mines (Nationalization) Amendment Act 1976 but some exceptions were allowed
because the nationalized coal companies were unable to fully meet demand. Since
1976, the captive mines were allocated to Iron and Steel companies only. Via the 1993
amendment, the captive mines were allowed to be allocated to power producing
companies too. In 2007, captive mining were allowed for coal gasification and
liquefaction also.
The concept of captive mining means that some mines are allocated to the companies
for its own need. The captive mining concept was devised so that the Iron, Steel and
Power producing units could get uninterrupted supply of coal. Via this policy,
government started giving coal blocks to companies for captive use. The condition was
that these companies could only use the coal for their own use such as in power
projects, steel mills, etc. but the sale of coal in open market was not permitted.
From 1993 till 2011, the Coal Ministry under 6 years of NDA rule and rest 11 years
under UPA rule had allocated 194 coal blocks for captive mining of which 142 were
explored and balance 52 remained either partially explored or unexplored.4

Coalgate

In a March 2012 draft report, the CAG accused Government of India of allocating coal
blocks in inefficient manner during 2004-2009 period.
 The basic argument of CBI was that the government chose to NOT to allocate the coal
blocks by process of competitive bidding.
 Coal blocks were given free resulting in the block-owners making windfall gains.

4
https://www.gktoday.in/academy/article/coal-nationalization-captive-mining-and-coal-gate/
 The functioning of the screening committee which evaluated the coal applications was
opaque.
 A few companies got more than required coal.
 Companies with political links got multiple blocks while more deserving candidates did
not get any.
 Ministers and CMs of the coal rich states lobbied for allotment to desired private
players.
 Private players resold the allocation and coal produced in the open market
The scam began to unearth when a BJP MP Hansraj Ahir kept saying that some
companies with captive coal blocks were changing hands. In 2012, the draft CAG report
said that the Government had lost Rs. 10.6 lakh crore due to not auctioning these
blocks. This number was later revised in the final report to Rs. 1.86 lakh crore. The
substantial difference between high market price of coal sold by CIL and lower cost of
coal produced by captive blocks; was one of the criteria to ascertain the loss in the CAG
report.
5

NATIONALISATION OF COAL MINES

Right from its genesis, the commercial coal mining in modern times in India has been
dictated by the needs of the domestic consumption. On account of the growing needs of
the steel industry, a thrust had to be given on systematic exploitation of coking coal
reserves in Jharia Coalfield. Adequate capital investment to meet the burgeoning
energy needs of the country was not forthcoming from the private coal mine owners.
Unscientific mining practices adopted by some of them and poor working conditions of
labour in some of the private coal mines became matters of concern for the
Government. On account of these reasons, the Central Government took a decision to
nationalise the private coal mines. The nationalisation was done in two phases, the first
with the coking coal mines in 1971-72 and then with the non-coking coal mines in 1973.
In October, 1971, the Coking Coal Mines (Emergency Provisions) Act, 1971 provided
for taking over in public interest of the management of coking coal mines and coke oven
plants pending nationalisation. This was followed by the Coking Coal Mines
(Nationalisation) Act, 1972 under which the coking coal mines and the coke oven plants
other than those with the Tata Iron & Steel Company Limited and Indian Iron & Steel
Company Limited, were nationalised on 1.5.1972 and brought under the Bharat Coking
Coal Limited (BCCL), a new Central Government Undertaking. Another enactment,
namely the Coal Mines (Taking Over of Management) Act, 1973, extended the right of
the Government of India to take over the management of the coking and non-coking
coal mines in seven States including the coking coal mines taken over in 1971. This
was followed by the nationalisation of all these mines on 1.5.1973 with the enactment of
the Coal Mines (Nationalisation) Act, 1973 which now is the piece of Central legislation
determining the eligibility of coal mining in India.6
5
https://www.gktoday.in/academy/article/coal-nationalization-captive-mining-and-coal-gate/
6
HISTORY/BACKGROUND, AT https://coal.nic.in/content/historybackground
 Increasing coal production has been one of the key policy objectives ever since India
got freedom. Coal sector was in private hands in British Era but after independence the
sector went into government control. First government organizations were National Coal
Development Corporation (NCDC) and Singareni Collieries Company Ltd. (SCCL).
 The major nationalization of coal mines occurred in 1970s when the Coking Coal
Mines (Nationalisation) Act, 1972 brought all coking coal mines and the coke oven
plants (other than TISCO and ISCO) under the Bharat Coking Coal Limited (BCCL), a
new Central Government Undertaking. All these mines were nationalized under the
Coal Mines (Nationalisation) Act, 1973. To manage the non-coking coal mines, the
Coal Mines Authority Limited (CMAL) was set up and National Coal Development
Corporation were brought under the Central Division of the CMAL.
 In 1975, Coal India Limited was formed as a holding company with five subsidiaries
namely Bharat Coking Coal Limited (BCCL), Central Coalfields Limited (CCL), Eastern
Coalfields Limited ( ECL ), Western Coalfields Limited ( WCL ) and Central Mine
Planning and Design Institute Limited ( CMPDIL ).
The Indian coal sector was thus dominated by Government and remains so even today.
Coal India Ltd. has 81% share in production while Singareni Collieries Company Ltd
has 9.5% share. Remaining coal comes from privately owned collieries and captive coal
mines.

DE-NATIONALISATION OF COAL MINES IN INDIA, 2015

The coal ministry had, from 1993 to 2011, allocated 218 coal blocks to eligible Public
Sector Undertakings and private firms for specified end-use projects, that is power, steel
and cement, as well as for commercial mining by PSUs. This was done under the
provisions of Coal Mines (Nationalisation) Act, 1973 through the Screening Committee
and Government Dispensation route.

However, these allocations were challenged before the Supreme Court, which in August
2014 cancelled the allocation of 204 blocks after finding that the allocations were
arbitrary and illegal.

To manage and reallocate the cancelled blocks in a transparent and accountable

manner, the Coal Mines (Special Provisions) Act, 2015 was enacted. Enabling
provisions were made in the above said Act for ‘allocation of coal mines by way of
auction and allotment for the sale of coal.’ Also, the allocation of coal blocks other than
the 204 cancelled were to be made under the provisions of the Mines and Minerals
(Development and Regulation) Amendment Act, 2010 and Rules.

In March 2017, the Coal Ministry brought out a discussion paper on auction of coal
mines for commercial mining under the provisions of the Coal Mines (Special
Provisions) Act, 2015 and Rules. The paper said “given the present demand-supply
situation and the projected economic growth of the country, it will be necessary
to further augment the production through commercial mining... certain mines
will be offered to all eligible companies in private as well as public sector through
auction mode.”
7

What are the benefits, and where is the catch?

It is expected to bring in greater efficiency, best possible technology, higher investment

and more employment in coal-bearing areas especially in the mining sector. It would
also lead to more revenue that can be used for development of the area and inhabitants
around the mine by the State. Jharkhand, Odisha, Chhattisgarh, West Bengal, Madhya
Pradesh, Telangana and Maharashtra would benefit the most.

Pointing out that currently, only aluminium and power producers are allowed to bid for
captive mines (coal mined could be utilised only in the industry for which the auction /
allocation of the block was done, and not for other purposes. Surplus coal needs to be
sold to CIL at the specified price) in India, Angel Broking said, adding under the new
guidelines, Indian and international companies will be allowed to participate in coal
auctions with the condition that they will infuse top-of-the-line technology into coal
mining.the move could be the first step towards the full privatisation of the mining
sector, adding that global mining giants like BHP, Rio Tinto, Anglo American and
Glencore have expressed interest in prospecting for coal in India. However, it said, coal
blocks would be commercially viable only if they are offered in minimum blocks of 40-50
million tonnes.

In what marked the culmination of the government’s efforts over the last few years to
populate the coal mining sector, promote investments in high-end mining technology
and have a competitive domestic coal market, the Cabinet Committee on Economic
Affairs (CCEA) set the ball rolling for auction of coal mines to private parties for
commercial use by approving the relevant methodology. The key reform will virtually
upend the Coal Mines (Nationalisation) Act, 1973, (CMNA) which has kept the sector
largely a preserve of public-sector monolith Coal India (CIL). The CCEA decision will
pave the way for global mining giants such as BHP Billiton, Rio Tinto and Glencore to

7
http://www.thehindu.com/business/Industry/why-has-coal-mining-been-opened-up/article22851689.ece
invest in India’s coal mining sector, apart from local/homegrown players like Vedanta,
Adani Group, Tata, GMR and JSPL.

Despite the increasing share of non-fossil fuels in India’s energy mix, the market for coal
is projected to grow at a solid pace for several more years as this high-emitting fuel will
continue to be the mainstay for the country’s power generation. Also, coal exports are a
potentially lucrative business for India. Recent years have seen other state-run entities
too establishing a presence in commercial coal mining and a jump in captive coal
production by a veritable cross-section of industries, public and private, but only
commercial coal mining by the private sector was to bring a transformative change in
the sector. While a CMNA amendment to de-nationalise coal mining is yet to
materialise, the legal route for commercial coal mining by private companies was
cleared by the government in March 2015, with the Coal Mines (Special Provisions)
Act.

According to coal minister Piyush Goyal, under the methodology cleared by the CCEA,
coal mines will be transferred to the private sector through forward auctions the
company that quotes the highest commissio to state governments will win the blocks.
The move, the minister said, would be economically beneficial to coal-bearing eastern
Indian states such as Bihar, Jharkhand, West Bengal and Odisha as all royalties would
be passed on to the state governments. When asked how the decision would affect CIL
and its arms, the minister said the PSU would become more competent as “greater
competition would lead to improved efficiency”.

On 20 February 2018, the Cabinet Committee on Economic Affairs (CCEA) permitted

private firms to enter the commercial coal mining industry in India. Under the new policy,
mines will be auctioned to the firm offering the highest per tonne price. The move broke
the monopoly over commercial mining that state-owned Coal India has enjoyed since
nationalisation in 1973On 20 February 2018, the Cabinet Committee on Economic
Affairs (CCEA) permitted private firms to enter the commercial coal mining industry in
India. Under the new policy, mines will be auctioned to the firm offering the highest per
tonne price. The move broke the monopoly over commercial mining that state-owned
Coal India has enjoyed since Nationalisation in 1973.
India is estimated have coal reserves of up to 300 billion tonnes; the country produced
652 mt of coal in 2016-17: 554 mt by CIL, 62 mt by Singareni Collieries and the balance
by captive coal producers. The country has set a target to increase coal production to
1,500 mt by 2022. After the Supreme Court, in 2014, cancelled 204 coal mines (barring
10 blocks with cumulative geological reserve of 5,418 mt) that were allocated to
government and private companies since 1993, 84 mines (53 PSU allotment, 31
8auction) have been reallocated for captive consumption to the power and non-

regulated (steel, cement, fertilisers) sectors under the Coal Mines (Special Provisions)
Act, 2015. These included coal blocks with extractable reserves of more than 8,500 mt.

8
https://www.financialexpress.com/economy/de-nationalisation-coal-black-future-for-miners/1073520/