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London-listed miner Essar Energy has received Government confirmation of the end of the ‘Go, No-Go' regime, which until recently determined whether forest clearances needed for mining projects would be given.
It is the first official confirmation the company has had of the scrapping of the system, announced in September. It could have major implications for India's mining sector. The Go, No Go system limited their ability to mine for coal, with activity in areas of dense forest banned entirely.
In a letter sent to Essar Energy earlier this week, the Ministry of Power confirmed that the Government was doing away with the go-no-go concept and that the Ministry of Environment and Forests would make decisions on a case-by-case basis. Essar Energy was advised to approach the Forest Advisory Committee at the “earliest” to seek forest clearance to commence mining at its Mahan coal block.
“The decision to abolish the ‘go and no go' system or coal blocks removes a major blockage to securing clearances for our Mahan, Chakla and Ashok Karkata blocks,” said Chief Executive of Essar Energy, Mr Naresh Nayyar in an emailed statement. “Our Mahan power plant is due to be completed by March and we are now optimistic we will get the necessary consents needed for the nearby coal block,” he added.
On stream next year
Essar Energy's 1,200-megawatt Mahan power station is due to go on stream in March next year, but plans for the nearby coal block with an estimated 125 million tonnes of coal, were put on hold because of the Go-No-Go system. The company has made arrangements for alternative sources of coal, including a tapering coal linkage with Coal India. It is also exploring the option of bringing in imported coal, and coal from e-auctions.
However, the costs of these options would be between twice and five times higher than sourcing its own coal locally (the company has estimated the cost of coal from its own blocks to be around $18 a tonne).
Now, however, should the company get approval swiftly, as it hopes to, the first coal from Mahan could be available within 15 to 18 months, ramping up to full volume in a further two and a half years. Essar Energy estimates that the Mahan coal block holds enough reserves for twelve and a half years.
The removal of the go-no-go regime will also have implications for the company's Ashok Karkata and Chakla blocks, both of which serve the 1,800-MW Tori power project in Jharkhand, also currently under construction.
The Government began to classify forested areas as go or no go areas back in 2009, and has so far banned mining in over 200 coal blocks.
The system faced considerable criticism, with opponents arguing that it locked up huge potential coal reserves at the time that the country urgently needed to expand its power generation capacity.
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