KOLKATA (miningweekly.com) - In a bid to further incentivise the forthcoming auction of coal blocks, the Indian government is considering tagging extraction rights of coal bed methane (CBM) to the blocks up for bidding.

In a note circulated within the government, the Oil and Natural Gas Ministry sought that the draft rules already announced for the coal block auction be changed to enable prospective successful bidders of the coal blocks to secure the rights for extraction of CBM from the same block.

The Ministry has rationalised that a move to club together coal and CBM extraction rights in a single auction process would kick-start the so-far floundering gas sector, which had failed to attract big ticket private investments.

It has suggested that prospective bidders be permitted to quote for mining rights for both coal and CBM from the same block, while submitting the technical and financial bids. It also suggested that the government back this up with necessary changes to the CBM policy of 1997.

An official in the Coal Ministry tasked with responding to the note from its counterpart in the Oil and Natural Gas Ministry said that the idea was a logical decision already taken by the government earlier in the month, to ensure the optimal exploitation of both resources.

Mining Weekly Online previously reported that the government had decided to tweak the legislative environment to enable private investors to simultaneously extract coal and CBM, whereas at present investors were only permitted to extract coal.

The legislative changes were scheduled to be brought before the Parliament session, which started on November 24.

The Indian government had already announced the auction of 74 coal block mining licences which had been cancelled by the Supreme Court. The auctions was scheduled for February 6, 2015 and the award of blocks was to be completed by March 11, 2015.

According to estimates of the oil and gas sector regulator, the Directorate General of Hydrocarbons, the country’s CBM reserves were estimated at 4.6-trillion metres.

Since 2001, the government had allocated 33 CBM blocks through auctions while two had been awarded to government companies through the nomination route. The current CBM production was pegged at 0.45-million metric standard cubic metres a day.

While the forthcoming auctions for coal blocks would be a maiden attempt for the country, clubbing together and awarding extraction rights for coal and CBM as the same time would be a first for the country, a government official added.