India resumes coal mining rights grants to power producers

Last Updated: Wed, Jul 03, 2013 15:50 hrs

By Malini Menon

NEW DELHI, July 3 (Reuters) - India has granted coal mining rights to state-run power producers for the first time in nearly five years in another attempt to speed up sputtering domestic production and investment in the sector.

The government awarded rights for 14 blocks, with state-run NTPC Ltd, the country's top generator, receiving four, the biggest allocation, the government said on Wednesday.

India's failure to mine coal quickly enough to meet fast-rising demand has exacerbated chronic power shortages that sap economic growth and force companies to turn to costly imports.

The 14 blocks will yield about 159 million tonnes of coal a year, which will fire about 31,800 MW of power generation, the government statement said.

None of the mines is explored and could face delays in obtaining land and environmental clearances, which have both been major roadblocks to increasing coal production.

Being able to start mining could take years, if past allocations are any indication.

"We need to assess the block, and then go for the various approvals. It will take time," said an official from one of the power companies that was awarded a block, who spoke on condition of anonymity due to the sensitivity of the matter.

The ministry, which shortlisted 128 applications for the rights, expects the allocations to attract 1.6 trillion rupees ($26.81 billion) of investment in the power sector alone.

The four mines allocated to NTPC have geological reserves worth nearly 2 billion tonnes in total, accounting for almost a quarter of the total reserve estimate, the statement said.

To further ramp up production, the government will next auction mining rights for seven explored coal blocks to private companies, company and government sources said.

For the first time, these allocations will be carried out through competitive bidding rather than on the recommendation of state and federal officials.

The switch is aimed at bringing more transparency to a sector that has been mired in a corruption scandal over mining rights potentially worth billions of dollars that hit Prime Minister Manmohan Singh's government last year.

($1 = 59.6725 Indian rupees) (Editing by Matthias Williams and David Cowell)

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