New Delhi: The government is contemplating significant measures to stimulate underground coal mining, including proposing a 50% exemption in revenue sharing with states and reducing bank guarantees. Two individuals familiar with the matter disclosed that these deliberations are driven by a committee's recommendations established to foster policies for enhancing underground coal mining. However, a final decision has not been reached yet, they added.

"One of the proposals being considered includes a 50% exemption in revenue sharing, which companies allocate to states, along with reduced bank guarantees," remarked one of the sources. Currently, coal mining enterprises need to allocate a proportion of their monthly revenue to states, a pivotal factor in bids for commercial mines, with a 4% revenue share set as the baseline.

Another measure involves the reduction of performance bank guarantees (PBG) required to secure loans. Initially revised annually based on the National Coal Index (NCI) in April, the coal ministry recently relaxed norms, allowing the first revision to occur upon permission for mine opening. The aim behind this reduction is to avoid holding up the capital of new coal mining entrants, thereby encouraging higher investments, explained the other source.

These recommendations are part of a comprehensive policy framework intended to promote underground coal mining, perceived as less environmentally detrimental compared to open-cast mining, said one of the sources.

However, in response to queries, the Ministry of Coal stated that no decisions have been finalized regarding the proposed exemptions in revenue sharing and bank guarantee reductions.

Coal Secretary Amrit Lal Meena recently announced that the government plans to introduce a policy framework for underground coal mining. Emphasizing the goal to boost production from underground coal mines to 100 million tonnes by 2030, Meena highlighted the lower environmental impact of such mining due to minimal deforestation and less displacement of people.

Coal Minister Pralhad Joshi also advocated a shift from open cast to underground mining, projecting Coal India Ltd's (CIL) aspirations to escalate underground coal production to 99-100 million tonnes by FY28.

Presently, underground mining contributes around 4% of India's total coal output, and the government aims to elevate this to 10% by 2030. To facilitate this, the coal ministry is seeking simplified environmental clearances and reduced compliance for underground coal mine approvals.

This move comes amidst India's commitment to green energy, aiming to install 500 GW of power capacity from non-fossil fuel sources by 2030. Despite this transition, the government plans to add 12 gigawatts of coal-based power generation capacity in the current fiscal year to meet rising energy demand. The Centre aims to augment the total thermal power capacity to 75 GW by 2032.

Despite being a significant coal producer globally, India faces challenges due to high demand, logistical constraints, and low calorific value of domestic coal, resulting in coal imports. Efforts are underway to curtail coal imports by FY26, despite India's coal production reaching 893.08 million tonnes in FY23, with a target of 1 billion tonnes set for the current fiscal year.