Understanding Commercial Mining

Commercial mining refers to the practice of allowing private sector companies to mine minerals without imposing any restrictions on how they choose to use them.

The Need for Commercial Mining

• The growing demand surpasses the production capacity of Coal India Ltd.
• Despite having the world's fourth-largest coal reserves, India ranks second in importing coal.
• According to predictions by NITI Aayog , the demand for coal is likely to rise to between 1.3-1.5 billion tonnes by 2030.
• The introduction of commercial mining is expected to stimulate competition and enhance the supply of coal.

Key Aspects of Commercial Mining

• Competitive bidding process that includes private sector companies.
• Coal blocks are allocated based on a 'revenue sharing model'.
  • In contrast to the production sharing model where profits are shared with the government, the revenue sharing model entails sharing a portion of the revenue generated from the sale of the mined mineral.
• The policy eliminates the need for captive end-use criteria.
• Adoption of a rolling auction mechanism to expedite the auction process throughout the year.
• Implementation of a single-window clearance system to accelerate the operationalisation of coal mines.

Advantages of Commercial Coal Mining

• Increased competition leading to enhanced revenues for the government.
• Greater participation from the private sector is likely to improve efficiency and boost the supply of coal.
• The policy allows for 100% FDI under the automatic route, leading to increased FDI inflow into the sector.

Commercial Oil & Gas Mining

In 2016, the Indian government unveiled the Hydrocarbon Exploration and Licensing Policy (HELP) , replacing the previous New Exploration Licensing Policy (NELP). This new policy aims to create a level playing field for private sector involvement in oil and gas exploration and mining.

Characteristics of HELP:

• A single license for the exploration and production of all types of hydrocarbons.
• Implementation of a revenue sharing model: The Government receives a share of the gross revenue from the sale of extracted hydrocarbons. This is a departure from the profit-sharing model employed under NELP, which required the Government to scrutinise the cost details of the private sector company involved.
• Open acreage licensing policy: This policy allows companies to select blocks of their choice by submitting an expression of interest. The allocation of these blocks is based on a bidding process.
• The policy grants freedom in marketing and pricing the crude oil and natural gas produced.
• A tiered system of royalty rates has been introduced, where the rates decrease from shallow to deep and ultra-deep water.

The Benefits:

• The revenue-sharing model minimises the government's involvement or scrutiny in the company’s operations, thereby enhancing the ease of doing business.
• The Open Acreage Licensing Policy (OALP) grants companies the discretion to express interest.
• The freedom in marketing and pricing significantly reduces government interventions.