Ushering in a new era for country’s coal sector since its nationalisation in 1973, the Government on Tuesday announced that it would open up coal mining to the private sector firms for commercial use. The move is aimed at ending over four decades’ monopoly of State-owned Coal India limited (CIl) in a bid to cut imports by raising domestic productions.
Announcing to the media about this biggest reform in coal segment, Minister for Coal and Railways Piyush Goyal said, “The Cabinet Committee on Economic Affairs (CCEA) under the chairmanship of Prime Minister Narendra Modi approved the auctioning of coal mines to any firm bidding the highest per tonne price.”
At present, only private sector firms are allowed to mine coal for use in their cement, steel, power and aluminium plants. The CIl is the sole commercial miner with 80 per cent market share.
However, Goyal said the opening up of commercial coal mining for private sector is the most ambitious coal sector reform since the nationalisation. “The reform is likely to bring efficiency into the coal sector by moving away from the era of monopoly of CIl to competition and lower power tariffs,” he said, adding that the move will lead to higher investments and create lakhs of direct and indirect jobs.
It is expected that the Government’s move will increase competitiveness and allow the use of best possible technology into the sector where the higher investment will create direct and indirect employment in coal bearing areas especially in mining sector.
The Centre had in 2014 auctioned 29 mines to private players and States for capital use in power, steel, aluminium and cement plants. In the following year, it permitted the allotment of coal mines to the States for mining and commercial sale to medium, small and cottage industries. Close to 16 mines were allotted to several States.
Asked how many coal mines will be auctioned for commercial mining, Goyal did not mention the number of mines but said the Government would take a calibrated approach after seeing the market response. “I think small, medium and even big mines are expected to participate in the auction,” he added.
The CCEA has also approved the methodology for auction of coal mines/blocks for sale of coal under the Coal Mines (Special Provisions) Act, 2015 and the Mines and Minerals (Development and Regulation) Act, 1957, according to the coal ministry’s statement.
“The methodology gives highest priority to transparency, ease of doing business and ensures that natural resources are used for national development,” the statement added.
“The auction will be an ascending forward auction whereby the bid parameter will be the price offer in Rs/tonne which will be paid to the State Government on the actual production of coal. There shall be no restriction on the sale and/or utilisation of coal from the coal mine,” it said.
The move will lead to energy security as 70 per cent of the country’s electricity is generated by thermal power plants, the statement said, adding that this reform will ensure assured coal supply, accountable allocation of coal and affordable coal leading to affordable power prices for consumers.
“As the entire revenue from the auction of coal mines for sale of coal would accrue to the coal bearing States, this methodology shall incentivise them with increased revenues which can be utilised for the growth and development of backward areas and their inhabitants including tribals,” the statement said, adding that the Eastern States will be especially benefited.
Goyal, however, said the move would also help ramp up domestic production and reduce dependence on imports, which in turn will save the country precious foreign exchange. “It will also help in bringing down power tariffs. West Bengal, Odisha, Jharkhand, Chhattisgarh, and Madhya Pradesh are the major coal bearing sates. India is believed to have reserves of 300 billion tonne,” he said, adding that the competition would help the state-owned miner.
The Supreme Court had in September 2014 cancelled 204 coal mines allocated to the different government and private companies since 1993 under the provisions of Coal Mines (Nationalisation) Act, 1973.