In a recent meeting with Coal Minister Piyush Goyal, representatives of some coal and steel companies came up with a strange demand: they wanted clarification of the term “illegal mining”, not by the dictionary, but by government’s interpretation of the term.

If everything is illegal, coal mining, argued the representatives, would stop in India, rendering thousands jobless because the companies will have to pay hefty penalties. The representatives said this was all happening because of last year’s Supreme Court order on a contentious section of the statute, which is now forcing miners to pay a penalty totalling 100% of the output.

Some numbers were also tossed around, even as the minister took notes. Goyal was told after the Supreme Court order against irregularities in mining activities in Odisha, the state issued notices to 131 mining leaseholders.

Odisha has collected about Rs 12,000 crore as penalty from defaulting mining companies against a total of Rs 17,576 crore. The state has also decided to confiscate the property of mining leaseholders who fail to pay their dues. Mahanadi Coalfields Ltd (MCL), the Odisha-headquartered subsidiary of state-run monopoly Coal India Ltd (CIL), has been issued final demand notice by the state government for Rs 8,300 crore.

In November 2010, acting on a CAG report, Odisha invoked Section 21(5) to slap recovery notices that pegged the excess in Odisha’s mines at around Rs 61,000 crore. The apex court later revalued the unlawful mining to lower the penalties to over Rs 18,000 crore. Neighbouring Jharkhand has also sent notices to mining companies, including three CIL subsidiaries, imposing large levies.

Following the 2 August Supreme Court order, the mines ministry issued a directive to all states asking them to make sure they were in compliance.

And now, Coal India Limited (CIL), the world’s largest coal company with cash reserves of Rs 38,000 crore, has to pay a whopping Rs 41,000 crore of fines for illegal mining in Odisha and Jharkand. More states will soon follow suit.

The August judgement of Justices Madan Lokur and Deepak Gupta dealt with iron ore and manganese, but since the judges spoke of “any mineral”, Odisha and Jharkhand governments have started levying fines. The representatives told Goyal that “over-mining wasn’t quite as illegal” as was being made out since royalties were paid on it and transport permits had also been issued by the state government.

“The coal sector is in its worst mess,” the minister was told by the representatives.

Goyal explained how his ministry is trying to evolve a unique strategy to boost production, improve efficiencies and sell this dry fuel in the open market. India is trying to push for commercial mining, it has 309 billion tonnes of resource identified so far spread over approximately 14,000 sq km. The government wants to auction large coal mines to private mining companies with freedom to sell and no restriction on end use, a deviation from the previous rule, which forced companies to use coal mined from captive mines for use in their plants, be it power, steel, cement or aluminium.

The ministry even wants an online platform to electronically track coal trade across the country every day. The ostensible objective is to make the process of coal sale and purchase transparent for both Indian and multinational companies.

But what happens if mining stops?

For the records, the Central Electricity Authority (CEA) has now stopped publishing its daily generation and coal supply reports, even as over half of India’s coal-based generation capacity reels under severe fuel shortage. The CEA’s daily reports on coal supply to power plants are available up to 6 March 2018, but there is no generation data since that date. Repeated efforts to reach CEA chairman Ravindra Kumar Verma proved futile.

As per the last generation report, 71,272 MW out of total 138,295 MW coal-based capacity had fuel stocks of less than seven days (critical shortage) against the standard, normative requirement of 15-30 days. Of the 71,272 MW, 41,865 MW, or 30% of total capacity, had fuel stocks of less than four days, which means it’s a supercritical shortage. About 31,000 MW capacity has been shown as having less than normative coal stocks. This is because out of 56 plants with less than seven days’ coal stocks, as many as 31 have been kept off critical and supercritical fuel stock lists under the revised CEA guidelines. Out of 100 power plants monitored by the CEA, 46 were having coal stocks of less than seven days as on 30 July 2014. This figure is now 56.

Worried such stoppages could have a severe impact on the economy, especially at a time when the general elections are scheduled within a year, the NDA, it is reliably learnt, is contemplating changing the definition of illegal mining. A legislative amendment will soon clarify the definition of illegal mining which has a direct impact on companies facing penalties.

Informed sources in Delhi say there would be some retrospective changes in the Mines and Minerals Development and Regulation Act (MMDRA), which will be put up to the Cabinet by the end of March after inter-ministerial consultation. India’s apex court ruled last August that violations of environment and pollution control laws in a lease were also to be considered illegal mining.

Many in the government said Section 21(5) under MMDR Act—it deals with illegal mining—only provided for mining carried out outside, or in the absence of a lease. Worse, there is no clarity on whether the Act should deal with violations in environment norms, which are dealt by separate laws. Now if mining has been carried within the permitted mining lease area, it cannot be termed illegal, companies have argued.

As per Section 21(5) of the MMDR Act, it says: “Whenever any person raises, without any lawful authority, any mineral from any land, the state government may recover from such person the mineral so raised, or, where such mineral has already been disposed of, the price thereof, and may also recover from such person, rent, royalty or tax, as the case may be, for the period during which the land was occupied by such person without any lawful authority.”

The representatives of affected companies have told Goyal that changes in the law would have to be retrospective because any change in a legislation is applicable from the date the law has come into force.

Goyal, who had claimed two years ago that India will not need to import the dry fuel by 2017, has promised to act fast. In India, power plants are battling a severe fuel crisis, the price in the free electricity market has soared above Rs 10 a unit. Worse, stocks of nearly a quarter of the coal-based plants are at critically low levels. And majority of the 30 producing captive coal mines allocated by the NDA government through auction route are stuck because banks are reluctant to lend to these projects for plant and machinery because of poor viability. Moreover, fear of having to incur crippling royalty payment obligation is holding back successful bidders from production.

Goyal needs to push the NDA government to take some quick calls.

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