Coal India to reopen abandoned mines, may offer mines to MDOs on contract
It will earn additional revenue without fresh investment
Coal India (CIL) is planning to use mine developers and operators (MDO) to reopen mines it abandoned because of safety and viability concerns.
The company may offer these mines, many of which hold good quality reserves, to MDOs on contract basis.
It will earn additional revenue without fresh investment even if the MDOs operate small quantities ranging between 250,000 tonne and 300,000 tonne of quality coal a year profitably.
These are sunk investments as the mines don’t yield returns any more. The company has been looking for ways to earn some revenue from them as a large number of these pits, mostly underground, hold premium grade coal.
Initially, 15-20 such mines will be offered, and the number will be increased if the response is good.
Also, tender documents were being prepared for mines to be offered on as-is-where-is basis. The MDOs would be selected on the basis of the net cash flow that can be generated from these mines from their production plans.
The company first planned to reopen abandoned mines in 2011. It had offered around 15 mines abandoned due to unavailability of suitable technology at the time.
The proposal was taken up by CIL.However, private parties that had shown interest in these pits wanted at least 49 percent equity stake. Also, there were no such provisions then and stake sale in these mines was not agreed by the government.