In a welcome move, the Union Cabinet has relaxed the regulations for coal mining in India. The ordinance amends the existing provision that allowed only companies engaged in iron and steel, power, coal washing sectors and others to bid for coal mines. Now all end-use restrictions have been removed, easing the entry of companies not engaged in any coal-use industry in coal mining. Moreover, existing private owners will now be able to sell their surplus coal in the market. The removal of these restrictions is in line with the objective of facilitating commercial coal mining in the country.
India is one of the largest coal producers in the world with an output of 729 million tonnes in 2018-19. However, despite sluggish economic growth, import shipments have surged from 190 million tonne in 2016-17 to 235 million tonne in 2018-19 — in value terms, imports touched $26.18 billion in 2018-19, up from $15.76 billion in 2016-17. This surge in coal imports, along with oil and electronics imports, has exerted pressure on the country’s current account in recent years. The relaxation in regulations, along with previous initiatives such as allowing 100 per cent foreign direct investment through the automatic route in commercial coal production, can aid in boosting coal production in the country and help reduce imports.
It will also encourage private players to participate in the auctions that are to be held to reallocate the captive coal blocks that were cancelled by the Supreme Court in 2014. So far, only 29 of the 204 blocks that were cancelled have been auctioned. Production from captive coal blocks had fallen to 25.1 million tonne in FY19, down from 43.2 million tonne in 2015. With these measures, the government is also facilitating the entry of major global mining players such as Rio Tinto and BHP BHP Billiton, which can help bring in the latest technologies for raising productivity. How quickly these investments fructify depends on the kinds of coal blocks offered, the infrastructure available, the government’s ability to ease the regulatory hurdles such as the process of obtaining clearances, and clearing of mining plans, that have complicated the process so far.
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