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West Bengal government looks to sell 30% of coal output in open market

New Delhi: The West Bengal government is keen on entering commercial coal mining and intends to sell 25% to 30% of its output in the open market from the world’s second largest block allotted to the state earlier this year.

Commercial sale is expected to provide economies of scale to the operation bringing down costs which, otherwise, are expected to be high due to difficult geological build of the block.

“All mining activities are associated with some difficulties but with larger scale of operations and advanced technologies these issues can be resolved,” state finance minister Amit Mitra told reporter at the Global Mining Summit organised by Confederation of Indian Industry in Kolkata on Wednesday.

During June this year, the Centre allotted Deocha Pachami to Bengal’s power generation company West Bengal Power Development Corporation Ltd (WBPDCL) as a captive block. Preliminary estimates suggests it is may hold 2.1 billion tonnes of reserves. Operations of the block will be undertaken by Bengal Birbhum Coalfields, a special purpose vehicle floated for purpose.

According to him, the state’s requirement would be for running 5,400 MW of thermal power plants. A senior power sector executive said it is expected to require around 24 million tonnes of coal a year for these power plants. However, 30-40 million tonnes needs to be produced to achieve economies of scale from the block to justify investments.

“We hope to soon receive the final allotment letter for the block following which bank guarantees are to be furnished,” said Rana Som, chairman of Bengal Birbhum Coalfields. “This would be followed by engagement of an exploration company that would ascertain the exact quantum of reserves and the technology to be used to extract coal.”

“We are aware that coal seams in the block lie beneath a thick layer of basalt rock that needs to be cracked first to extract the coal through underground mining,” said Som. “Basalt is used for a variety of construction work including laying railway tracks and the company could sell it in the open market as well.”

The Centre had earlier planned to allot the block to a number of states jointly but none, other than West Bengal, showed interest as preliminary production cost estimates turned out to be very high. The Centre finally awarded the block to West Bengal.