GUIDELINES FOR ALLOCATION OF CAPTIVE BLOCKS FOR COAL LIQUEFACTION (COAL TO LIQUID (CTL) PROJECTS) & CONDITIONS OF ALLOTMENT

 

A.                                  SELECTION OF CAPTIVE BLOCKS:

 

(i)                     It is proposed that for producing oil and oil products about 1 to 1.5 billion tonnes of coal reserves of E/F grade will be made available. Suitable block/ cluster of blocks will have to be identified for this purpose, in consultation with CMPDIL.

(ii)                   The block/ cluster of blocks should enable mining operations of 28-31 million tonnes of run-of-mine coal per annum for 30 years.

(iii)                The ash and moisture content of coal should not be more then 50% and ash fusion temperature should be more than 1200 degree celsius.

(iv)                 Blocks should have low rank coal, without swelling or caking properties.

(v)                   Blocks already identified for development by CIL/ SCCL/ NLC, and where adequate funding is on hand/ in sight, should not be offered to private sector.

(vi)                 The blocks offered should be at a reasonable distance from existing mines and projects of CIL/ SCCL/ NLC in order to avoid operational problems.

(vii)              The areas where CIL/ SCCL/ NLC have invested in creating infrastructure for opening new mines should not be handed over to others, except on reimbursement of investment made.

(viii)            If blocks that are explored in detail and where geological reports with assessment of extractable reserves are available, are offered for this purpose, the company to whom the block is allotted shall reimburse the full cost of exploration.

(ix)                 For identifying blocks, the requirement of coal for about 30 years or such other period as may be decided in the Ministry would be considered.

 

B.          CONSTITUTION OF INTER-MINISTERIAL GROUP:

 

An Inter-Ministerial Group (IMG), constituted with the following Members, shall examine the proposals received for allocation of coal blocks to CTL projects:

 

I

Member, Energy, Planning Commission

Chairman

II

Secretary, Department of Expenditure

Member

 

III

Secretary, Ministry of Coal

Member

IV

Secretary, Department of Industrial Policy & Promotion

Member

V

Secretary, Department of Science & Technology

Member

VI

Secretary, Ministry of Petroleum & Natural Gas

Member

VII

Principal Adviser (Energy), Planning Commission

Member

 

 

The Ministry of coal will provide the necessary secretarial assistance to the IMG. The IMG may invite other experts as per the requirement.

 

                                                                                                     

C.          ELIGIBILITY CRETERIA:

 

                 I.        Since the expected investment for a 3.5 million tonne oil and oil products project is expected to be around 6 to 8 billion US dollars, the applicant company should have minimum net worth of Rs. 4000 crores.

 

              II.        Since the technology for coal to liquid may not be indigenously available, the applicant company has to provide details of collaborations/tie up with the proven technology providers, along with supporting documents.

 

D.          APPLICATION FOR ALLOCATION OF BLOCK:

              

              I.               The Ministry of Coal will invite, through advertisement/ public notice, applications for allocation of identified coal blocks for CTL projects from interested parties.

 

            II.               Applications for allocation of coal blocks for CTL projects shall be made to the Director (CA-I), Ministry of Coal in five copies.  The application shall be accompanied by the following, in addition to any other relevant documentation that the applicant may submit:

 

·                 Certificate of registration showing that the applicant is a company registered under Section 3 of the Indian Companies Act, 1956. This document should be duly signed and stamped by the Company Secretary of the Company. (1 copy)

 

·                 Applicant company should have experience or tie up with a company which has proven technology to convert coal into liquid. Supporting documents in this regard may be provided.(5 copies)

 

·                 Document showing the person/s who has/have been authorised to sign on behalf of the applicant company while dealing with any or all matters connected with allocation of the sought coal block/s, with the Government/ its agencies. This document should be duly signed and stamped by the Company Secretary of the Company. (1 copy)

 

·                 Certified copy of the Memorandum and Articles of Association of the applicant Company. (2 Copies)

 

·                 Audited Annual Accounts/ Reports of last 3 years. (5 copies)

 

·                 Salient features of the technology to be used. (5 copies)

 

·                 Detailed schedule of implementation (milestones and time-line for each milestone) for the proposed end use project and the proposed coal mining development project in the form of bar charts. However, the overall timeframe proposed should not exceed the normative time ceiling prescribed for the development of coal mines. (5 copies)

 

·                 Detailed schedule of exploration (milestones and time-line for each milestone) in respect of unexplored blocks. However, the overall timeframe proposed should not exceed the normative time ceiling prescribed. (5 copies)

 

·                 Scheme for disposal of unusable containing carbon obtained during mining of coal or at any stage thereafter including washing. This scheme must include the disposal/ use to which the middlings, tailings, fines, rejects, etc. from the washery are proposed to be put. (5 copies)

 

·                 Demand draft for Rs.10,000/- in favour of PAO, Ministry of Coal payable at New Delhi.

 

·                 A soft copy of the details, as filled in the Application Form, is also to be furnished in the specified Database Form (in MS-Excel format) in a CD along with the application.

 

Applications without the above accompaniments shall be treated as incomplete and rejected.

 

 

III    The applications received in the Ministry of Coal in five copies, after being checked for eligibility and completeness, would be placed before IMG.

 

IV  Inter-se priority for allocation of a block among competing applicants for a captive block may be decided having regard to the following:

 

·          Status (stage) level of progress and state of preparedness of projects;

·          Applicant company should have a networth of Rs. 4000 crore, or in the case of a new SP/JV, the networth of their principals;

·          Credentials of the applicant company/associate company/technology provider in terms of past track record in execution of CTL Projects;

·          Installed production capacity for CTL, if any, any where in the world;

·          Technology proposed – whether commercially tested/ established;

·          Tie up with the established  technology owners/providers;

·          Commitment on minimum conversion efficiency;

·          Date of commissioning of captive mine as proposed in the application;

·          Date of completion of detailed exploration (in respect of unexplored blocks only) as proposed in the application;

 

V.   The recommendations of IMG will be placed before the Government for final decision. On the approval of Government, allocation shall be made.

 

 

 

E.           EXPLORATION:

 

I.            In respect of fully explored blocks, geological data may be obtained from CMPDIL, NLC or the State agency concerned, as the case may be, on nominal charges. However, full cost of exploration and geological reports shall be reimbursed to the agency concerned within six (6) weeks from the date of issue of allotment letter.

 

II.          Where only regionally explored blocks are offered for allocation, the detailed exploration/prospecting in the said blocks shall be done by the allocattee company in conformity with the guidelines prescribed by the Ministry of Coal in this regard.

 

III.         In order to promote scientific and proper mining, larger blocks shall not be sub-blocked artificially into smaller ones. Only natural sub-blocks will be formed.

 

F.           MINING OF COAL BY ALLOCATTEE COMPANIES:

 

I.            The following dispensations are permitted for mining of coal from captive blocks:

 

a)        The allocattee end user company can itself mine coal from a captive block; or

 

b)       The allocattee company can get the block mined through a mining company supplying the coal on an exclusive basis from the captive coal block to the end-user company, provided the end-user company has a firm tie up with the mining company for supply of coal, supported by legally binding and enforceable contract/ agreement.

 

G.          CONDITIONS OF ALLOTMENT

 

                        I.       Upon allocation of captive coal block by the IMG the applicant would submit an affidavit in the prescribed format to the effect that all coal mined from the captive block shall exclusively be used in the proposed end use project for which the said block has been allocated and that in case of any slippage in implementation of the end use project or the captive coal mine development project, as per the schedule of implementation/ bar charts submitted and agreed to by the Ministry of Coal, the said block shall be deallocated  without any liability to the Government /its agencies, whatsoever. 

 

                      II.     The normative time limit ceilings have been provided to ensure that the coal production from the captive block shall commence within 36 months (42 months in case the area is in forest land) of the date of issue of letter of allocation in OC mine and in 48 months (54 months in case the area fall under forest land) from the date of the said letter in UG mines.

 

                   III.       In respect of an unexplored block, the allocattee company shall apply for a prospecting license within three months from the date of issue of allotment. The exploration shall be completed and geological report prepared within two years from the date of issue of prospecting license.

 

                  IV.       Any slippage in meeting with the above time limits, unless previously agreed to by the IMG, for special reasons to recorded in writing, may lead to forfeiture of bank guarantee, or/and cancellation of allocation, previous approval under Section 5(1) of the Mines and Minerals (Development and Regulation) Act, 1957 or mining lease, as the case may be.

 

                    V.       The allocattee company shall be required to submit a bank guarantee of Rs. 300 crore within 3 months of the date of letter of allotment, as performance guarantee.

 

                  VI.       50% of the bank guarantee shall be linked to the milestones (time schedule) set for development of captive block, and the remaining 50% to the guaranteed production. The bank guarantee shall be liable to be encashed in the following eventuality:

 

1.       There shall be an annual review of progress achieved by an allocattee company.  In the event of lapses, if any, in the achievements vis-à-vis the milestones set for that year, a proportionate amount shall be encashed and deducted from the bank guarantee.

 

2.       Once production commences, in case of any lag in the production of coal/lignite, a percentage of the bank guarantee amount will be deducted for the year.  This percentage will be equal to the percentage of deficit in production for the year with respect to the peak rated capacity of the mine, e.g., if rated/peak capacity is 100, production as per the approved mining plan for the relevant year is 50 and actual production is 35, then (50-35)/100x100= 15% will lead to deduction of 15% of the original bank guarantee amount for that year. Upon exhaustion of the bank guarantee amount, the block shall be liable for de-allocation/cancellation of mining lease.

 

3.       The allocattee shall ensure that the bank guarantee remains valid at all times till the mine reaches its rated capacity or till the bank guarantee is exhausted. Any lapses on this count shall lead to de-allocation/ cancellation of mining lease.

 

               VII.       The Company shall obtain the geological report (in respect of fully explored blocks), on payment of requisite charges, from CMPDIL, NLC or the State Government agency concerned, as the case may be, within six weeks from the date of issue of allotment letter.

 

             VIII.       In respect of a fully explored block, the company shall submit a mining plan for approval by the competent authority under the Central Government within six months from the date of issue of letter of allocation.

 

                  IX.       In respect of an unexplored block, mining plan shall be submitted for approval by the competent authority within two years and six months from the date of issue of the letter of allocation.

 

                     X.       Mine opening permission shall be considered only after financial closure for the proposed end use project is achieved.

 

                  XI.       All middlings, tailings, or rejects from the washery, as the case may be, and all unusable containing carbon obtained during the mining of coal or in any process thereafter, if any, shall be used for captive consumption only by the allocattee in his proposed end use project or as per the scheme for disposal submitted by the applicant and agreed to by the IMG.  In the event that disposal is allowed by the Government, the modalities of disposal of surplus coal/ middlings/ rejects, if any, would be as per the prevailing policy/ instructions of the Government at the relevant point in time and may also include handing over such surplus coal/ middlings/ rejects to the local CIL subsidiary or to any person designated by it at a transfer price to be determined by the Government.