(The Gist of PIB) Coal Mines commercialisation

(THE GIST OF PIB) Coal Mines commercialisation

Minister of Coal, Mines and Parliamentary Affairs Pralhad Joshi gave details about commercial coal mining in India in a written reply in Rajya Sabha recently.

In 2020, as a part of the announcements made under the Atmanirbhar Bharat Abhiyan, the Central government allowed commercial mining in the coal sector.

What is commercial mining?

Commercial mining allows the private sector to mine coal commercially on a revenue-sharing model without placing any end-use restrictions.
Removing end-use restrictions marks the end of the captive mining regime.
Captive mining is the coal mined for a specific end-use by the mine owner, but not for open sale in the market.
A revenue sharing mechanism instead of the earlier fixed price per tonne will introduce competition, transparency and private sector participation in the market.
The private firms will have the option of either gasification of the coal or exporting it. They can also use it in their own end-use plants or sell them in the markets.
Further, with 100 percent foreign direct investment allowed in the coal sector, global companies can also participate in the auctions.
The complete freedom to decide on sale, pricing, and captive utilisation is expected to attract many private sector firms to participate in the auction process.
The government expects these steps will generate employment and reduce India’s import bill.

Was the private sector never allowed in mining?

Private sector participation was permitted until the early 1970s. The Indira Gandhi government announced the nationalisation of the coal blocks in two phases between 1971 and 1973.
The recently announced reforms will effectively end state-owned Coal India Ltd (CIL)’s monopoly over mining and selling of coal.

Is this the first attempt by govt to open up the sector?

After the Supreme Court cancelled the coal block allocations made to the private sector in 2014, the central government had brought in the Coal Mines (Special provisions) Act of 2015 to return these coal blocks to the private sector through auctions.
But there had been end-use restrictions and the private sector was not allowed to trade into the market making it unattractive for the private sector.
Further in 2018, private sector firms were allowed to sell upto 25 per cent of the output in the market, but this also saw a lukewarm response from the private sector.

The government has also decided to spend Rs 50,000 crore on creating infrastructure for coal extraction and transport. This would also create job opportunities for locals closer to their homes.
Despite India having the world’s fourth largest coal reserve and being the second largest producer, the country was the second largest coal importer. The sector had been kept out of competition and devoid of transparency, hampering investment and efficiency.
Fully opening up the sector would increase competition, capital, participation and technology. It would ensure new private players did not face the problem of finance.