Coal: Nationalisation, the Cancellation and Commercial Mining

In one line

The only Indian resource whose ownership regime has been rewritten three times in fifty years, and the section that decides who gets a block today is section 11A.

In the wording a student can write in an exam: section 11A provides that notwithstanding anything contained in the Act, the Central Government may, for the purpose of granting a mineral concession or a composite licence in respect of coal or lignite, select any of the specified companies through auction by competitive bidding, on prescribed terms, to carry on coal or lignite reconnaissance, prospecting or mining operations, for own consumption, sale or any other purpose as the Central Government may determine; with a proviso that the auction shall not apply where the area is considered for allotment to a Government company or corporation, or to a company awarded a power project on the basis of a competitive bid for tariff, including an Ultra Mega Power Project.

The three regimes

First, the private regime before nationalisation. Coal was a major mineral, worked under leases granted by the States, and the pattern of small, badly worked mines was the standard criticism of it.

Second, nationalisation. The coal mines were taken into public ownership in the early nineteen seventies, the industry was vested in public sector companies, and mining coal for sale became a State monopoly. A private company could hold a block only for its own consumption, and the device by which it did so is the captive block.

Third, allocation and its cancellation. Captive blocks were allotted administratively over three decades. Those allocations were challenged and cancelled, and section 11A as it now stands is the statutory consequence: a block is granted by auction through competitive bidding conducted by the Central Government.

Fourth, and this is the current position, commercial mining. Section 11A now speaks of mining "for own consumption, sale or for any other purpose as may be determined by the Central Government". The words "or sale" are what ended the monopoly: a private company may now win a block at auction and sell the coal.

Section 11A, read closely

"Notwithstanding anything contained in this Act." The section overrides the ordinary concession machinery of sections 4 to 11 of the Act, which Module II sets out. Coal and lignite are outside it.

Who may be selected. A Government company or corporation, a joint venture company formed by such a company or between the Central and State Governments or with any other company incorporated in India; or a company, or a joint venture of two or more companies.

How. Auction by competitive bidding, on terms and conditions as prescribed.