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India seeks more private-sector investment in coal mining

29th May 2015

By: Keith Campbell

Creamer Media Senior Deputy Editor

  

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In a major reform that is set to transform India’s coal mining sector, the national government in New Delhi is getting ready to auction coal blocks, the production from which would be sold on the open market, to the private sector. Hitherto, private-sector companies in India could only own and operate coal mines if the coal produced was dedicated for use in another of that company’s facilities, such as a steelworks or power plant. Only State-owned miners could produce coal for the open market.

This is all set to change. The government has already identified the coal blocks it intends to sell. It will now consult coal specialists, industry bodies and foreign miners and draw up the tender documents. The plan is for the first auctions to take place during the current Indian financial year (which coincides with the South African financial year – April 1 to March 31).

This has been made possible by the passing of the Coal Mines Special Provisions Bill by the Indian Parliament on March 20. This ended State-owned Coal India’s monopoly of commercial coal mining and allows private- sector companies registered in the country to mine and sell the energy mineral.

“We are conscious of the fact that coal production has to go up in this country to the levels we are talking about, we will have to go in for commercial coal mining,” Ministry of Coal secretary Anil Swarup told the Economic Times newspaper. (Secretary is equivalent to director- general in South Africa.) “We are organising a seminar next month in Ficci (the Federation of Indian Chambers of Commerce and Industry) to work out the nuances and details. I am saying nuances, as we don’t really know what the implications are of what we are going to do.”

The seminar is scheduled for June 23 and it is expected that both Indian and foreign mining companies will attend. The intent of the Coal Ministry is to draw up a draft tender document and then discuss it with coal sector stakeholders. Apart from the hope that the first auctions will take place this financial year, there is no set timeline for the implementation of the new policy.

The national government is also considering assigning coal blocks to state governments (India is a federation) for them to exploit on a commercial basis. “That will give another dimension of understanding,” he told the newspaper. “(Commercial mining by states and private companies) could happen together or it could be sequenced. We have not decided what would be first and what would be later.”

The reform has been driven by the fact that Coal India’s output has, in recent years, been stagnant, while there has been a surge of private investment in the power sector to meet India’s growing energy needs. The result has been that many of the recently built coal-fired power stations have suffered from inadequate coal supplies. Perhaps ironically, Coal India’s production suddenly jumped by a record 8.3% during the last financial year.

 

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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