The government’s move to facilitate the auction of coal blocks to private power, steel and cement companies for captive use is a half-hearted attempt to tide over the impasse in India’s coal sector. While it partially addresses the uncertainty stemming from the Supreme Court’s decision to cancel 214 coal mining allotments made between 1993 and 2010, it falls short of significant policy reform. A more tangible reform measure would have entailed opening up commercial (as opposed to just captive) mining to private and foreign players. This would have meant ending the monopoly of state-owned Coal India Ltd and Singareni Collieries, which alone can mine coal for commercial purposes. India currently sits on the world’s fifth-largest coal reserves and yet imports some $20 billion worth of coal annually.
Domestic production needs to be urgently stepped up but state-owned miners have failed to do so. Captive mining isn’t a real alternative since a power or cement producer lacks the specialisation or competence to extract maximum coal in a given area at the least cost and with minimum damage to the environment. This expertise can only come from professional, full-time commercial miners. CIL’s lack of expertise is illustrated by the fact that while over half of its 429 mines are underground, needing greater technical expertise to operate than open-cast mines, they produced less than a 10th of its output of 462 million tonnes last year.
Earlier governments probably understood the limitations of state-owned miners in increasing coal output and for that reason decided to hand over coal blocks to private players for captive mining. But with the Supreme Court cancelling most of the 218 blocks allocated since 1993, on grounds that these did not follow transparent procedures, even this policy received a setback. Monday’s decision does not go beyond seeking an auction of the cancelled blocks, while limiting the scope of such auctions to captive miners. Given this government’s decisive mandate — which has just been reinforced by victories in the Maharashtra and Haryana polls — it could have done much more. While the blueprint unveiled on Monday incorporates an “enabling provision” for amending the Coal Mines Nationalisation Act, 1973, in the future, with the objective of allowing commercial mining by private players, the lack of a credible timeline leaves it hanging in the balance. Reform, in the true sense, would have meant the scrapping of the state monopoly and denationalisation of coal assets, the only way forward for this sector.