NEW DELHI: The government will open up the Indian coal sector with a large offering of over 200 blocks for commercial coal mining in the next five years having a potential to produce at least 400 million tonnes of coal at peak capacity. The government hopes to stop coal imports by power plants by 2024, a senior government official said.

The first tranche of coal auctions for commercial sale purposes is likely to begin this financial year with about 40 coal blocks with peak mining capacity in the range of one million tonnes to 50 million tonnes per annum to cater to needs of all coal consumers, sources said.

The coal ministry is expected to issue bidding rules for commercial coal mine auctions by the end of this month and hold stakeholder consultations next month, the official said. A few large blocks will have peak rated capacity in the range of 30-50 million tonnes per annum, which can ease India's coal deficit. Last fiscal India imported 235 million tonnes of which 125 million tonnes or about 54% were thermal coal imports.

Due to non-availability of coking coal reserves, India will have to allow imports by iron and steel plants while the thermal coal imports can be stopped, he said.

“Some of the coal blocks being offered are fully explored, meaning reserves are known, while theothers are partially explored with peak capacity not known. The combined annual peak rated capacity of the explored blocks is 400 million tonnes,” the official said. Some of the mid-sized and large coal blocks being considered for commercial coal mining are Chendipada I and II, Madanpur North, Fatehpur and Fatehpur East, Mahanadi and Machhakata.

ET had on November 18 reported that the coal ministry will auction coal blocks for commercial mining on revenue sharing basis and proposes to announce incentives for quick production.

This will be the first time after mass cancellation of coal blocks by the Supreme Court, that the mines are being auctioned outside the reverse bidding model.

The revenue sharing model is based on recommendations of an expert committee headed by former CVC Pratyush Sinha formed after the fourth and fifth rounds of auctions saw tepid response from the industry.

In order to incentivise early mining, the government’s revenue share is proposed to be reduced by 10% if the selected bidder starts the mine a year earlier than the agreed timeline.

Revenue sharing is proposed to be reduced by 20% if mining begins two years ahead of plan. While the government will not regulate prices, marketing or sale of coal from the mines, minimum production from the commercial coal mines will be specified and the bank guarantees are planned to be linked to it. This is being planned to prevent hoarding and creation of artificial scarcity.