CAG Flags NLC India for Operating Neyveli Mine-II without Valid Environmental Clearance

Why It Matters

The findings expose critical compliance and resource‑management failures that threaten NLC India's profitability and India's lignite‑based power supply, prompting tighter regulatory scrutiny.

Key Takeaways

• Mine-II operated without valid environmental clearance.
• Land shortage leaves only 46.19 ha for active mining.
• Potential revenue loss of ₹338.62 crore from lignite shortfall.
• Additional ₹364.80 crore spent on dumped-soil mining.
• Plant outages caused ₹2,353.99 crore capacity charge loss.

Pulse Analysis

NLC India, a state‑owned lignite miner and power producer, has come under intense scrutiny after the CAG disclosed that its Mine‑II at Neyveli ran without a current environmental clearance. The lapse traces back to poor coordination between the company’s environment cell and mining planners, violating Supreme Court and Ministry of Environment directives from 2017‑2018. Such regulatory breaches not only risk legal penalties but also erode stakeholder confidence, especially as India’s energy mix leans heavily on domestic coal and lignite to meet growing demand.

The audit highlights a stark land‑availability crisis: out of 12,835 hectares earmarked for mining, only 46.19 hectares remain viable for extraction, yet this tiny parcel holds enough lignite for just 20 months of supply. The shortfall forced a 2.77‑million‑tonne deficit in FY23, translating into an estimated ₹338.62 crore revenue loss. Compounding the issue, the company resorted to mining over dumped‑soil zones, incurring an extra ₹364.80 crore expense. Simultaneously, repeated failures at thermal power stations—fluidised‑bed heat exchangers, fires, turbine bearings—sapped capacity, costing roughly ₹2,353.99 crore in lost capacity charges. These figures underscore how operational inefficiencies can quickly cascade into massive financial setbacks.

For the broader Indian mining and power sectors, the CAG report serves as a cautionary tale about the cost of regulatory non‑compliance and inadequate resource planning. It signals that auditors and regulators are intensifying oversight, especially for legacy assets with aging infrastructure. Companies will need to bolster internal coordination, expedite environmental clearances, and invest in modernising plant equipment to safeguard both revenue streams and energy security. Failure to act could invite stricter penalties, tighter licensing norms, and heightened investor wariness across the sector.

CAG flags NLC India for operating Neyveli Mine-II without valid environmental clearance

ET Bureau · Published on Feb 12, 2026 at 07:34 AM IST

NLC India operated its Mine‑II in Neyveli without a valid environmental clearance due to delay in applying for revalidation, restricting the state‑owned lignite mining and power generation company from production and sale of minor minerals, the Comptroller and Auditor General (CAG) said on Wednesday.

In a report submitted in Parliament, CAG said lack of coordination between the company's environment cell and Mine‑II planning department caused the lapse in following the orders from the Supreme Court of August 2017 and the environment ministry in April 2018 in time.

The audit report on “operational performance of NLC India Ltd” covered the period from 2017‑18 to 2022‑23.

The audit also flagged land constraints for active mining. Of the 12,835 hectare of land identified for mining in Neyveli, NLC India held 9,180 hectare. But only 46.19 hectare of land was left for active mining after accounting for mined‑out and dumping areas, it said.

The small area held an estimated 44.10 million tonnes of lignite, sufficient for about 20 months till November 2024 against the annual requirement of 26.66 million tonnes.

The land shortage resulted in a short supply of 2.77 million tonnes of lignite in FY23, causing a potential revenue loss of ₹338.62 crore, the central auditor said.

Further, in Mine‑IA, the inability to acquire land in the eastern side forced mining on dumped‑soil areas, leading to an additional expenditure of ₹364.80 crore.

The audit included assessment of lignite production of three mines at Neyveli, namely Mine‑I, Mine‑IA and Mine‑II, and review of the operational performance of some thermal power plants. These included TPS‑I (expansion), TPS‑II and TPS‑III (expansion) located at Neyveli.

Three units of NLC India failed to achieve the Central Electricity Regulatory Commission's prescribed plant availability factor due to extensive outages caused by repeated fluidised‑bed heat exchanger failures in TPS‑IIE, fire and equipment failures in TPS‑II and turbine bearing failures in TPS‑IE. The shortfall resulted in revenue loss of ₹2,353.99 crore in capacity charges, the CAG report said.