Auction of Coal Mines in India: A Disaster in Making

Author: Aryan Bajpai

The author gives a critical take on the 'reforms' brought recently into the coal mining sector with the stated purpose of increasing power generation. Other issues relating to power generation and distribution which have mostly been ignored by policy-makers, like renewable energy, discom risk, etc.; are highlighted.


India is the world’s third-largest energy consumer but still depends on other countries for importing a significant amount of coal to serve its energy needs. India’s energy mix still relies a lot on coal, with 44% of energy production coming from this source.[1] Since independence, coal has been given a special status which has represented economic growth in India, due to which leaders of several political parties still give it preference. Though the preference and priority given to coal have been justified to be in ‘public interest’ of India, the actions and even the legal instruments have safeguarded the interests of the private multinationals and the government itself.[2] A prominent example of this apparent inconsistency in policy implementation is the protests by the villagers of Kulapada in Sundargarh district against the Mahanadi Coalfields Limited (a subsidiary of Coal India Limited) since the mid-1990s to get jobs and employment for the people who have been displaced due to the mining activities.[3] Moreover, mining coal is increasingly condemned by several environmental activists and international organizations due to its link with the climate crisis and resulting disasters. [4]

Problem Areas in Coal Mining Operations

On June 18, 2020, Prime Minister of India, Narendra Modi announced the auction of 41 coal blocks spread across central India for commercial mining, as a part of 'Atma-Nirbhar Bharat' (self-reliant India).[5] This news comes at a time, when a global pandemic has caused significant harm to the Indian economy, and when the country is still recovering from damages done by Cyclones Amphan and Nisarg along with the desert locust attack in Western India, which shows that the crisis has already resulted in massive damage and losses.

As per his announcement, the government will be spending 50,000 crores on creating the infrastructure for coal extraction and transport, which will provide the dual benefit of high revenue and employment opportunity.[6] The central government's aim to boost production comes from the fact that even after having the fourth largest reserve of coal in the world, India is still the second-largest importer of coal also. The reasons for this are India’s twin pressures of rapid population and economic growth have driven substantial increases in India's energy demand, with the energy consumption getting doubled over the past two decades. To meet the growing demand, India's electricity generation capacity has more than doubled over the past decade. This announcement has sparked concern over the future of the energy sector in the country as the decision not only reflects outdated thinking, but at the same time it stands against the constitutional rights of the state government and the village bodies in the country.[7]

This announcement is not a singular event but has been planned along over the years, ever since the BJP led government began its term in 2014. The Coal Mines (Special Provisions) Act, was enacted to undo, the effect of the judgment passed by the Supreme Court in 2014, concerning the allocation of the coal blocks, which stated that the allocation of the 218 mines to private companies was in a direct breach of the Coal Mines Management Act of 1973. Under the new law, the private companies could be allotted coal mining operations for promoting optimum utilization of coal resources consistent with the ‘national interest’ of the country, even though some end-restrictions remained, which prohibited the private companies from trading. The companies acquiring Schedule II and Schedule III coal mines through auctions could use the coal produced only for power generation and steel production.

Increased Role of Private Corporations and Displacements

However, during the early months of lockdown in 2020, the central government passed the amendment of the Mineral Laws Bill under which all the end-use restrictions were lifted, thus allowing the companies to carry out coal mining operations for self-consumption, sale or any other purposes, thus providing incentives to the private companies to bid in the auctions.[8] The role of private players has been steadily increasing in the coal sector, which has led to an increase in controversial land acquisition and, consequently, displacement of more than a million tribals and small landholders, as observed in the earlier studies on the subject matter.[9] Land acquisition for mining purposes is not something new but has been carried out by private players with the support of government agencies since independence. For instance, according to a report by Amnesty International, 87,000 Indians have been displaced over the past 40 years by state-owned Coal India Ltd., and one of six such people are adivasis.[10] Several acts such as The Panchayats Extension to Scheduled Areas (PESA) and The Chotanagpur Tenancy Act (CNTA) have failed to prevent the acquisition of tribal land for coal mining and old colonial acts such as The Land Acquisition Act (LAA) of 1894 were used to procure land from peasants[11]. The announcement made by the PM also goes against the constitutional rights of the village bodies, by violating the Forest Rights Act (FRA) as the villages where the mines are located fall within the Schedule 5 areas, under which the central government is prohibited to grant any license to another party, if it stands inconsistent with the recommendation of the Gram Sabha. [12]

There exists a trade-off that is unipolar where the government ignores the poor, weak, and illiterate citizens and instead focuses on assisting private capital and corporations. The multinational mining companies believe that the exports of coals and other minerals will accelerate the economic development of the country, which in turn will develop the 'required' infrastructure and bring about the progressive socio-economic transformation of the indigenous population.[13] The land acquisition in the name of economic development leaves the tribals and the small landholders as ecological refugees. It has resulted in several protests and conflicts with the multinational and even the public mining companies all over India. This false ideology based on ‘assumption of development’ and a unipolar approach by the government have led to the displacement of over a million people alone between 1950 to 1995, but the figure could go way beyond as there is no official record kept of such type of 'mining-induced displacements'.[14]

Effect on the Environment

In the period of lockdown due to Coronavirus, the government has passed several laws and given specific clearances that put the environment of the country at significant risk.[15] The most important of these documents is the Environmental Impact Assessment (EIA) Notification, which dilutes the whole process of providing environmental clearances by reducing the power of the public and increasing the number of projects which would not be requiring any environmental clearance.[16] With respect to the coal mines, the EIA Notification plans to increase the operational phase for mining from 30 to 50 years but mentioned no details about their redundancy or closure[17]. The EIA, moreover, only assesses the impact in a defined area, even though the impact on the soil and water level, could extend well beyond the mining area and its surroundings.[18]

The auction of coal mines along with heavy investments in the infrastructure for the same will make it difficult for India to achieve its NDC targets [19] within the given time frame. India aimed to reduce the emissions intensity of its GDP by 33-35 percent from 2005 levels by 2030[20], which seems difficult to achieve since there has been an increase in the share of the coal in the total installed capacity and will also discourage investors from investing in the renewable sector[21]. The 41 coal mines to be auctioned are located in biodiversity-rich forest areas in Central India, including some in one of the most significant contiguous stretches of dense forest called Hasdeo Arand that spans over 170,000 hectares.[22] Several state governments, including those of Jharkhand and Chhattisgarh, have made motions against the action of the central government, with the former moving to the Supreme Court.[23] Along with this, several heads of villages have also sent letters against the announcement to the Prime Minister.[24]


The problem mentioned above can be addressed in several ways. There is a need of radical shift in the stance of government policy and legislative direction. The government should focus on the declining renewable sector [25][26] in the country and make efforts to push private investments in the sector. [27] It is crucial for the solar and wind segments that the government restores the sanctity of auctions by removing arbitrary barriers like ceilings and by refraining from cancellations or postponements of bids.[28] It should explore new mechanisms to manage unabating discom (distribution company) risks, which continue to remain the weakest link in the power system, despite multiple attempts by the government for financial restructuring and improving operational efficiency.[29] As the government looks to resolve immediate problems in the renewable sector, it should also not lose sight of ‘de-carbonization’, which should be the long-term goal.

Along with this, options to strengthen the power of small landholders and tribals must be explored other than the existing forms of compensatory mechanisms to protect their lands, which are rightfully owned by them. Modifications or ‘legal reforms’ of mining are not enough. To reshape the economic development path of India’s mineral belts and coal mines, there is an urgent need to think about radical and fundamental changes in ownership. Development must be considered in a broader sense, which not only envisions economic growth but also the social and environmental impact of every action.

[The author is a student of Social Sciences at the Tata Institute of Social Sciences, Tuljapur.]

Notes and References

[1] Department of Industry, Innovation and Science, O. (2019). Coal in India 2019 (pp. 12-14, Rep.). Australian Government. [2] Meher, Rajkishor. "Globalization, displacement and the livelihood issues of tribal and agriculture dependent poor people: the case of mineral-based industries in India." Journal of Developing Societies 25.4 (2009): 457-480. [3] Amnesty International India. (2016). When Land is Lost, Do we Eat Coal: Coal Mining and Violation of Adivasi Rights in India (pp. 10-15, Rep.). Amnesty International. [4] Timperley, J. (2020, April 06). The Carbon Brief Profile: India. Retrieved July 14, 2020, from . [5] Narendra Modi launches auction process for 41 coal blocks for commercial mining. (2020, June 18). Retrieved June 22, 2020, from . [6] (2020, June 19). Coal India, Vedanta, Hindalco on radar after PM launches auction process for coal blocks. Retrieved June 22, 2020, from . [7] Rajalakshmi, T. (2020, July 07). Auction of coal mines: Against all reason. Retrieved July 12, 2020, from . [8] PRS, I. (2020, March 13). The Mineral Laws (Amendment) Bill, 2020. Retrieved July 10, 2020, from . [9] Bhengara, Ratnakar. "Coal mining displacement." Economic and Political Weekly (1996): 647-649. [10] Amnesty International India. (2016). When Land is Lost, Do we Eat Coal: Coal Mining and Violation of Adivasi Rights in India (Rep.). Bangalore, Karnataka: Amnesty International India. [11] Lahiri-Dutt, K., Krishnan, R., & Ahmad, N. (2012). Land acquisition and dispossession: private coal companies in Jharkhand. Economic and Political Weekly, 39-45. The Land Acquisition Act 1894 has been repealed and replaced by the right to Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013. [12] Mishra, R. (2020, June 16). Gram sabhas of Hasdeo Arand area write to PM to stop coal block auction. Retrieved July 10, 2020, from . [13] Ibid. [14] Fernandes, Walter. "Mines, mining and displacement in India." 2006). Managing the Social and Environmental Consequences of Coal Mining in India, The Indian School of Mines University, Dhanbad (2006): 333-344. [15] Suri, R. (2020, May 1). Is an environmental apocalypse approaching India? Retrieved July 10, 2020, from . [16] Aggarwal, M. (2020, March 18). India's proposed overhaul of environment clearance rules could dilute existing regulations. Retrieved July 10, 2020, from . [17] India, Government of India, Ministry of Environment, Forest and Climate Change. (2020). Paragraph 19, Sub Section 1, Environment Impact Assessment Notification Draft. New Delhi: Government of India. [18] India, Government of India, Ministry of Environment, Forest and Climate Change. (2020). Environment Impact Assessment Notification Draft. New Delhi: Government of India. [19] Nationally Determined Contributions (NDCs). (n.d.). Retrieved July 10, 2020, from . [20] Government of India. (n.d.). India's Intended Nationally Determined Contribution. Retrieved June 22, 2020, from . [21] Ibid. [22] MSTC Limited, G. (n.d.). Mine Summary for Commercial Mining. Retrieved June 21, 2020, from . [23] Jamwal, N. (2020, June 22). After Jharkhand, Chhattisgarh and Maharashtra oppose the Centre's auction of 41 coal blocks for commercial mining - Gaonconnection: Your Connection with Rural India. Retrieved July 10, 2020, from . [24] Alam, M. (2020, June 16). Chhattisgarh: 9 Sarpanchs Write to PM to Stop Mining Auction at Hasdeo Arand . Retrieved July 10, 2020, from . [25] Jhawar, P. (2020, February 11). Renewable energy: India's wind power sector is in a downward spiral. Retrieved July 10, 2020, from . [26] (Alwar), N. (2020, February 11). RENEWABLE ENERGY: India may find it difficult to meet its 175 GW target by 2022, finds CSE and Down To Earth's State of India's Environment report. Retrieved July 10, 2020, from . [27] Down to Earth, C. (2020). State of India's Environment 2020. New Delhi: Centre for Science and Environment. [28] Jhawar, P. (2019, April 23). Solar and its challenges in India. Retrieved July 10, 2020, from . [29] Ibid.

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