New Delhi: In a move aimed at enhancing energy security, the government Wednesday cleared allotment of coal blocks to PSUs for the sale of the fossil fuel mainly to medium, small and cottage industries and a policy for developing Underground Coal Gasification in coal and lignite areas.


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"The Cabinet Committee on Economic Affairs (CCEA), chaired by Prime Minister Narendra Modi, has given its approval for allotting coal mines to central and state PSUs for sale of coal, especially to medium, small and cottage industries, under the provisions of the Coal Mines (Special Provisions) Act, 2015," an official statement said after the meeting.


This, it said, will also enhance domestic production of coal to meet growing demand of the economy, potentially cutting down imports.


The coal-bearing states shall get additional revenue from such coal mines "equal to the amount of royalty on the quantity of coal produced on a monthly basis" during the lease period/life of the mine as well as one-time upfront payment, which is 10 per cent of the intrinsic value of coal in the mine, in three installments in the first year of allotment.


It is expected that the incremental coal produced from such coal mines would cater to the unmet demand of the coal in the country, especially of medium, small and micro industries and bridge the gap between demand and supply considerably, it added.


"The Union Cabinet... has approved a policy framework for development of Underground Coal Gasification (UCG) in coal- and lignite-bearing areas in the country," another statement said.


A policy on the lines of the existing policy for Coal Bed Methane (CBM) development on a revenue sharing basis will be adopted to offer the blocks through competitive bidding. 


UCG is a method of extraction of energy from coal/lignite resources which are otherwise regarded as uneconomical to work through conventional mining methods.


An inter-ministerial panel under the Coal Ministry with members from the ministries concerned will be responsible for identification of the areas, marking blocks to be put up for bidding or awarding them to PSUs on a nomination basis.


The Ministry of Coal may engage a consultant for development of the contract document.


"For development of bid documents, work programme, conducting the bidding process, evaluation of bids, monitoring and process protocols etc, the Central Mine Planning and Design Institute Limited (CMPDIL) will be the nodal agency," the statement said.


In the next two years, some explored blocks will be identified for the purpose.


Union Coal and Power Minister Piyush Goyal today said the Cabinet has approved allotment of coal blocks to PSUs and a policy framework on Underground Coal Gasification policy.


"Methodology for allotment of coal mines/blocks for sale of coal to PSU," he tweeted.


"Policy framework for development of Underground Coal Gasification in coal- and lignite-bearing areas in India," he said in another.