State-run Coal India Ltd (CIL) has started buying surplus output from a captive mine of an Odisha government entity for augmenting supplies to its own customers, a deal that will help reduce imports by raising availability of the indigenous fuel and open a new revenue-earning window for coal-bearing states.

CIL subsidiary Mahanadi Coalfields Ltd (MCL) has started lifting 6,000 tonnes of coal daily from the Manoharpur mine in Jharsuguda district allotted to Odisha Coal and Power Ltd (OCPL). MCL will pay according to the official price list, commonly known as the ‘notified price’. It can earn 20 per cent more than the notified price by selling the coal to non-power consumers and get even higher returns by selling through e-auction.

The deal draws on the government’s aim of increasing competitiveness and making captive mine auctions/allotments commercially attractive by giving owners freedom to sell surplus output. In February, the government further made it more attractive by allowing sale of 25 per cent production. It will also help CIL reduce supply backlog to non-power consumers, which has come down 1,600 rakes from 5,100 rakes.

Manoharpur has a production capacity of 8 million tonne per annum and was allotted in August 2015 for fuelling OCPL’s 1,200-MW IB thermal power plant. Production had to be suspended soon after operations began as evacuation bottlenecks blocked delivery to the power plant, resulting in build-up of stockpile at the mine.

The CIL had board approved the modalities of MCL lifting coal from Manoharpur mine on November 11. MCL will lift the coal under a provision in its mine development and production agreement that envisaged OCPL to hand over surplus coal to CIL.