Coal Bonanza in the making

States, especially the relatively poorer ones, are in for a bonanza due to the coal auctions with the government estimating payments of Rs.3.5 lakh crore over the next few years once 204 coal mines, whose allotment was cancelled by the Supreme Court, are auctioned. The new revenue stream will be in addition to another Rs.3.5 lakh crore flowing to them by way of royalty payments.
Among the seven states, the initial round of auctions are expected to benefit Chhattisgarh and Odisha the most since majority of the cancellations are related to these two states. But over the next few years, mineral rich Jharkhand is expected to steal a march over the rest. According to estimates, over the next 30 years, Jharkhand may end up pocketing close to Rs.1.25 lakh crore from the 60 blocks with reserves of over 15,000 tonnes. This will translate into annual receipts of around Rs.4,100 crore — which is almost 35% of the own tax revenue of Rs.11,800 crore that the state has budgeted to mop up during the current financial year.
Odisha is expected to be the second major beneficiary with receipts of close to Rs.1 lakh crore from coal mined in the 30 blocks. So, annually it can hope to get around Rs.3,200, which is around 17% of the budgeted tax collections of Rs.18,300 crore for the current fiscal year.
Sources said that the payment calculations are baseline estimates and the actual flows could be much higher, helping some of the states garner resources to meet their development and infrastructure needs. The calculations are ba sed on the assumption that 70% of the coal is supplied to the power sector at Rs.100 a tonne, while the remaining goes to others such as steel at Rs.300 a tonne.
Following the Supreme Court order last year, the government has initiated the process of auctioning coal mines and the process has already been set in motion. The court has given the government time till Marchend to complete the auction process, which will help keep several power and steel plants running.
The realizations are expected to pick up over the years once more blocks commence production. The estimates suggest that the power sector will help states generate around Rs.1.5 lakh crore, while Rs.2 lakh crore will flow from the others that consume coal.