The funds will be used to avoid the immediate insolvency of the partnership running Hatfield Colliery near Doncaster, securing the short-term future of around 500 jobs.
The pit is in Labour leader Ed Miliband’s constituency and he blamed ministers for failing to support the development of clean coal technology which could have saved the pit.
A first instalment of £2m was paid to Hatfield Colliery Partnership Limited (HCPL) on New Year’s Eve. The money buys time to examine the case for a longer-term loan which could allow the pit to remain open until 2016.
Business and Energy Minister Matthew Hancock told MPs in a written ministerial statement that the pit’s directors approached the Government in November to say that the “viability of the business was in doubt” as a result of “unfavourable coal prices, exchange rates and production issues”.
Mr Hancock said: “The taxpayer would face significant costs and liabilities in the event of an immediate insolvency of HCPL, principally relating to safe closure costs for the mine, redundancy and unpaid tax liabilities. Considering this, the taxpayer is better served by supporting a managed closure of the mine.”
The Government expects the loan to be paid back in full.
Doncaster North MP Mr Miliband applauded the intervention but said the Government must accept some of the blame for the industry being in this position.
“It has dithered, delayed and failed to act on clean coal technology - carbon capture and storage. So, Britain is falling behind and the industry is losing out,” Mr Miliband said.
The MP’s warning came as a new study suggested more than four fifths of the world’s coal reserves cannot be burned if global temperatures are to stay below dangerous levels.
Chris Kitchen, secretary of the National Union of Mineworkers (NUM), said there was no common sense, economic or environmental reason why the Government could not support the deep-mined coal industry longer term given that over 30 per cent of the UK’s electricity is generated from coal.
“The NUM remains committed to extending the life of not only Hatfield but Kellingley and Thoresby Collieries as long as possible and are requesting that HCPL instigate an application for State Aid as is being done by UK Coal which would see the working life of the colliery extended to December 2018,” Mr Kitchen said.