New Delhi, April 24: The cabinet today allowed the auction of coal mines to steel mills, power plants and cement units for their captive use.

To pave the way for the auction, the government proposes to amend the mining act. It also cleared the merger of Bharat Refractories with Steel Authority of India Ltd. The accumulated losses of Bharat Refractories to the tune of Rs 225 crore as well as arrears from loans and interests of Rs 86 crore will be waived.

The cabinet also approved the Rs 4,909-crore thermal power plant of Neyveli Lignite to be set up in collaboration with the Tamil Nadu Electricity Board.

At present, coal-bearing land is allocated to steel mills and power plants of the central government but there are questions of transparency in such allocations, a government official said.

According to the official, amendments to the Mines and Minerals (Development & Regulation) Act 1957 will soon be brought before the Rajya Sabha to introduce competitive bidding for coal blocks. Part of the money from the auction will be earmarked for the rehabilitation of the displaced and community development projects in the coal-bearing areas, which are mostly on tribal land.

The reason for this stipulation is that tribal unrest has occurred in coal bearing states such as Jharkhand and Orissa over land acquisition. About 60 per cent of the country’s energy requirement is met by coal.