Pvt firms get PPP ticket to coal mining

Move expected to reduce dependence on imported coal, boost production; analysts say it will help bring best practices

To reduce its dependence on imported coal and increase production of coal in the country,the government has,in the Budget,announced that it will allow private firms to mine coal along with Coal India Limited CIL,the public sector coal miner,under public-private partnership PPP initiatives.

In the medium to long terms,we must reduce our dependence on imported coal. One of the ways forward is to devise a PPP policy framework,with CIL as one of the partners,in order to increase the production of coal for supply to power producers and other consumers. These matters are under active consideration and the minister of coal will announce the governments policies in this behalf in due course, finance minister P Chidambaram said in his Budget speech in Parliament.

India imported over 100 million tonnes between April and December in the current fiscal. The imports are estimated to rise to 185 million tonnes in 2016-17,if the coal requirements of the existing and future power plants are taken into account. Industry observers welcomed the move to allow PPP in coal production,saying this will also help in bringing best practices into the sector.

This is a good move as this will not only increase production of coal in the country but also bring in best mining practices being followed in the country. We need to partner with big international players as they will also add value to the sector by bringing best practice being followed globally, said Partha S Bhattacharyya,former chairman and managing director of CIL.

Any plan to bring private participation to coal mining will require the government to amend the Coal Mines Nationalisation Act,1973. Under the Act,all coal produced,except those produced by captive mines,have to be sold only to designated end users,while surplus has to be sold to Coal India.

In another announcement that would lead to an increase in electricity charges,Chidambaram announced to introduce basic customs duty of 2 per cent on steam coal and increased countervailing duty CVD from 1-2 per cent.

Power utilities may pass on the increase in duty to consumers. Announcing that the country will need an investment of 1 trillion or Rs 55,00,000 crore in infrastructure during the 12th Plan,the finance minister announced a slew of steps to boost investment in infrastructure. The Plan envisages that the private sector will share 47 per cent of the investment. Besides,we need new and innovative instruments to mobilise funds8230;, he said.

Story continues below this ad

The steps announced to boost investment in infrastructure include encouraging Infrastructure Debt Funds,asking multilateral banks to assist the government in promoting connectivity in the Northeastern part of the country,raising the corpus of NABARD to build infrastructure under Rural Infrastructure Development Fund and allowing institutions to raise Rs 50,000 crore through tax-free bonds,among others.

For the current year,institutions such as the National Highways Authority of India,which had permission to raise Rs 10,000 crore in the current fiscal,did not raise it on the grounds that they did not require the money immediately.

The Budget does not provide any short-term solutions to solve the problems that the infrastructure sector is in. All these solutions will yield results in the medium and long terms but the sector wants a quick fix solution, said Parvesh Minocha,MD at Feedback Infrastructure Services Private Limited.