Sudheer Pal Singh / New Delhi September 7, 2010, 0:12 IST Ministry mulls 5% project profits for local area development. Power, cement and steel companies may have to spend part of their profit for local area development near their captive coal mines. The ministry of coal is considering a proposal to commit at least 5 per cent of profits from a project for local area development under guidelines being finalised for competitive bidding of captive coal blocks. The proposal, if finalised, would add to the storm that has already been brewing as a result of a different, but similar, proposal by the government asking mining companies to share 26 per cent of their profits with the local populace and make them stakeholders in mining projects. An inter-ministerial committee is currently finalising detailed guidelines to introduce competitive bidding for coal mines, which is expected to bring transparency to the allocation of captive blocks to private companies in the power, steel and cement sectors. A Bill to introduce the new regime by amending the Mines and Minerals (Development and Regulation) Act, 1957, was passed by Parliament last month. The current proposal stems from the fear of various state governments that the new system of auctioning coal blocks would dilute their rights over the natural resource. States had, therefore, demanded that the guidelines provide for a financial commitment from a winning bidder towards compensation to local people. A few states suggested that the commitment should be not be less than 5 per cent of net profits. A decision would be taken after consultations with stakeholders. The Andhra Pradesh government had suggested to the Union coal minister during discussions on the Bill that 5 per cent of profits be earmarked for community welfare and social causes. AP is not alone in demanding a financial package from companies. Maharashtra and West Bengal have demanded the creation of a separate mineral development fund.