The Ministry of Coal expects to discover market-determined prices for coal for the first time in the country after it allots 16 coal mines to State government-owned companies for commercial mining.

The allotments will be completed by September and production is expected to start in another year or two after that.

Coal Secretary Anil Swarup said on Tuesday that there will be no restriction on where the coal is sold from these mines and the prices at which it is sold.

“There will no restriction on pricing from our end. We hope this will lead to discovery of market determined pricing of coal for the first time in the country. Right now Coal India is determining the price. With another entity coming in, some sort of a market will be created and price discovery will happen,” Swarup said adding that he expects the move to benefit small and medium enterprises.

Out of the 16 mines identified for commercial coal mining by State government-owned companies, eight will be given to the host State and eight will be available for public sector companies of other States. The host States for which eight mines have been reserved are Chhattisgarh, Jharkhand, Madhya Pradesh, Maharashtra, Odisha, Telangana and West Bengal.

The 16 mines have geological reserves of 2.137 billion tonnes and are expected to add an additional 40 million tonnes of annual coal production in India.

Swarup said the State government-owned companies can form joint ventures before applying for allocations, however, post allocation the entity cannot enter into any joint venture or transfer the mine.

“The ownership of the entity applying for the allocation must be with the State government or State government-owned company. They can form a joint venture where they own 74 per cent of the venture before applying for the allocation. However, post allocation transfer of mines will not be allowed,” he said.

While these 16 mines will take another year or two to come into production, Swarup said he expects the country’s total coal production in the 2016-17 to be at 700 million tonnes. Out of this, 598 million tonnes are expected to come from Coal India while the rest will come from the mines that were auctioned last year and Singareni Collieries Company Ltd.

No auction for now With coal supply growing faster than the demand, Swarup said the Ministry does not plan to auction coal mines in the next 2-3 months and even commercial coal mining for the private sector will not be opened in the foreseeable future.

“Right now, coal supply is growing at 9-10 per cent while demand is growing at around 5 per cent. The government is not opposed to commercial coal mining by private companies but right now there is no need to go ahead with it,” he said.