KOLKATA (miningweekly.com) – Close on the heels of opening up commercial coal mining to overseas resource majors, India’s Coal Ministry is framing a supporting policy framework to woo global resource companies at the forthcoming coal block auctions.

“We have opened up the coal mining sector allowing 100% foreign direct investments (FDI). We are formulating various policies to attract foreign investors and private sector within the country,” Coal Minister Pralhad Joshi said in a statement.

“The current size of coal blocks being put up for auction are too small and to attract foreign investors we need bigger blocks. We are deliberating on these issues and within the next fortnight or month we will come out with a policy on this,” Joshi added.

He said that while allowing 100% FDI for wholly owned subsidiaries of global resource majors had already been approved by the Union Cabinet of Minister, the Coal Ministry was finalising a supporting policy, which, however, would also need approval of the Cabinet of Ministers, he said.

Though the contours of the proposed supporting policies were not clear, sources in the government have indicated that these could include setting liberal norms while setting eligibility criteria for private foreign mining investors. It was possible that the Coal Ministry would seek minimal past experience in mining operations and minimum net worth criteria, with the depositing of upfront cash on successful bidding and performance bank guarantees being sufficient conditions to determine bidder eligibility.

It ha been unofficially learnt that the Coal Ministry has identified 15 coal blocks to be put up for auction exclusively for commercial mining by private global resource majors with each block having annual production capacity of four-million tons. However, considering the latest thinking in the Ministry on the blocks on offer is that they would need to be "large" to entice foreign investors, some of the blocks could be merged subject to geographical feasibility.

The Minister strongly discounted the possibility of adverse impacts on State-run Coal India with the advent of foreign miners. According to Pralhad, the demand for electricity over the coming years would surge so fast that both the State miner and foreign resource companies would not be able to meet aggregate demand for the dry fuel.

He maintained that operations of both the State miner and global resource companies would be complementary with the latter bringing in the latest coal mining technologies and best practices while the former would be able to share experience and expertise in operating in India's specific local mining environment.