Pvt coal block operators may get Methane rights

The oil ministry wants to award the blocks they hold for coal mining for Coal bed methane exploration, on a nomination basis

A year after the coal scam came into the public domain, landing the Manmohan Singh government in trouble, the ministry of petroleum and natural gas is in line to take yet another controversial decision. In an upcoming Cabinet note giving mandate to state-run Coal India Ltd (CIL) to explore coal-bed methane, the petroleum ministry has added that private captive coal producers can also go for CBM exploration in their existing blocks.

The oil ministry wants to give the blocks they hold for coal mining for CBM exploration on a nomination basis. “The motive of Cabinet note was to make the CIL stake sale more attractive, as the company was suffering from environmental issues as well as production constraints. Now, it wants to make it gainful for private captive coal producers too,” said a coal ministry official close to the development. According to sources, the addition of private players happened within a week’s time, “with the knowledge of petroleum minister M Veerappa Moily.”

Moily’s move would allow captive users like power, cement and also iron and steel companies, who are holding mining rights for captive coal blocks. The major companies that may reap the benefits include Essar Power, JSW Steel, Reliance Energy, Tata Power and GVK Power, which got allotted blocks after 1993.

This comes in the backdrop of the coal scam, in which the comptroller and auditor general (CAG), had highlighted that arbitrary allocation of coal blocks from 2004 to 2011 have cost the exchequer more than Rs 1.86 lakh crore.

“It is better to give them the first-right of refusal, after a proper bidding process. Even if they allot CBM blocks to captive users, it should come at a price, otherwise it may lead to another scam. Moreover, there are already mine-developer-operator (MDO), joint venture and alliance models, which the government can implement for captive blocks. As their rights were for coal mining, not gas exploration, even on nomination basis it should not go away at a throw-away price,” said a former Coal India executive.

The current policy would be a joint effort by the petroleum and coal ministry. The CBM policy adopted by the government in 1997 would be left untouched. The move would allow CIL to explore CBM in close to 4.5 lakh hectares of area either leased or licensed under Nationalisation Act. Currently, the major CBM players in Indian CBM space include Great Eastern Energy Corporation (GEECL), Essar Oil and Reliance Industries. The country is expected to produce more than 7.4 million metric standard cubic meters per day in the next couple of years.

“For a exploring coal-bed methane in existing coal blocks, even Coal India subsidiary CMPDI has not given a nod, saying that it is not a viable option. Hence, these players should be given the right to explore coal-mine methane. If those who have virgin coal blocks are wanting to explore CBM, it should be through NELP route only,” said a senior CBM industry expert.

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