Cabinet ends Coal India monopoly, allows commercial mining by private firms

Move will allow both domestic and foreign players to sell the fuel in open market as a commodity, at market-determined prices

Private companies would soon be able to mine and sell coal in India, alongside state-owned Coal India (CIL).

Four years after enabling commercial mining and sale of coal through the Coal Ordinance (Special Provisions), 2014, the Cabinet on Tuesday approved a bidding process for commercial mining.

Coal Secretary Susheel Kumar said the auction would be on a transparent online platform. “There will no end-use and price restriction. It would be up to the players to bring down prices in the open market.” Companies would also be free to export.

Piyush Goyal, minister for coal and railways, said: “The quality of coal would improve with commercial mining and imports would come down. We want India to be self-sufficient in coal. The move aims to improve the ease of doing business in India.”

Kumar said the Centre would not get any share from commercial mining. The government would conclude the auction in 2018-19, so that production can start in two to three years. He said the mines and auction platform had not been identified.

 “There is no cap over prices or types of coal. Allied infrastructure such as washeries can be set up by the government or the companies themselves.”
 

Goyal said: “The government has taken several measures in coal sector which will enhance competition, bring efficiency in production, reduce import, save foreign exchange and generate job opportunities.”

In 2015, the government had allowed allotment of coal mines to states for mining and commercial sale to medium, small and cottage industries. This was after an auction in 2014 of 29 mines to private players and states, for captive use in the power, steel and the aluminium industries.

Experts called the move a positive. “Power generators can now source commercial coal to improve margins and availability. Further, as merchant power prices fall, power utilities and manufacturing industry, too, will benefit from lower energy costs,” said Kameswara Rao, partner at consultancy PwC.

Anjani Agrawal, partner at consultancy EY, said, “Success will depend on the size of the blocks identified, flexibility of sales, distribution and pricing, and consistency of regulations over a long period.” 

A K Khurana, director-general, Association of Power Producers, said: “We hope the government will learn from earlier auctions and make conditions/regulations conducive for competitive and sustainable price discovery. The objective of auctions would need to shift from revenue maximisation to productivity and sustainability.”

On whether the proposed move would become a threat to Coal India, the minister said commercial mining would help the state-owned miner, too, because competition would ensure efficiency. Kumar said commercial mining would have no bearing on CIL’s production targets. Coal India aims to touch one billion tonnes of production in 2019-20.

CIL has been the dominant commercial miner in India for 41 years and has a market share of 80 per cent. Another permitted player is Singareni Collieries, a venture of Coal India and the Telangana (earlier Andhra) government. The rest of the requirement is met through import and production from captive mines.